Nutrien
Annual Report 2019

Plain-text annual report

Ag Solutions to Feed the Future Annual Report 2019 Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information1-5 Corporate Overview 6-8 Letter from the President and CEO 9-67 Managementʼs Discussion & Analysis 12-20 Nutrienʼs Strategy 21-44 Operating Segment Performance & Outlook 45-56 Financial Overview 57-60 Enterprise Risk Management 61-67 Other and Appendix 68-69 Two Year Highlights 70-133 Financial Statements 134-137 Terms & Other Information About this report: You can find this report and additional information on Nutrien on our website at nutrien.com. While we include certain non-financial performance in this report, more detailed information on our Sustainability strategy and performance is provided on our website at nutrien.com/sustainability. All financial data in this report is stated in US dollars unless otherwise noted. The Corporate Overview and Letter from the President and CEO contain certain non-IFRS financial measures which do not have a standard meaning under IFRS including: • EBITDA, adjusted EBITDA and Potash adjusted EBITDA • Adjusted net earnings per share • Free cash flow and free cash flow including changes in non-cash working capital • Retail EBITDA per US selling location • Adjusted net debt For definitions, further information and reconciliation of these measures to the most directly comparable measures under IFRS, see “Non-IFRS Financial Measures” beginning on page 63. See pages 134 and 135 for definitions, abbreviations and terms used in the annual report. Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Ag Solutions to Feed the Future At Nutrien, we are committed ground to grower. With a world- to supporting growers across class low-cost production the globe that are faced with platform, extensive distribution the challenge of producing network and direct relationships more, high-quality food while with growers, we are uniquely at the same time being more positioned to deliver value to all productive, sustainable and our stakeholders. profitable. We are transforming the agricultural industry by developing and offering growers innovative tools, solutions and technology to address this challenge. We will continue to build the best channels to reach and serve our customers and stand shoulder-to-shoulder with them as we lead the industry in providing Ag Solutions to We operate across the Feed the Future. agricultural value chain from 2 Billion ADDITIONAL PEOPLE TO FEED BY 2050 1 1 Source: FAO #1 >500K NUMBER OF NUTRIEN GROWER ACCOUNTS AGRICULTURE RETAILER AND CROP NUTRIENT PRODUCER BY SIZE 1 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other InformationWhy Invest in Nutrien? The Path to Create Superior Long-Term Value Nutrien is well-positioned within the Ag sector with its unique and value-enhancing integrated business model. We have a clear path to grow returns for shareholders by developing leading whole-acre solutions, continually optimizing our production profile and lowering costs, while maintaining significant leverage to a potential upturn in the crop input market. Broad Exposure to Ag Value Chain Well positioned to deliver value with the strength of our people, products, supply chain, data and technology across the Ag value chain. Superior Returns with Lower Risk Our business model has historically displayed earnings stability while still offering significant leverage to the agriculture cycle. Financial Strength & Flexibility Diverse earnings, strong free cash flow and balance sheet and integrated model facilitate efficient allocation of capital. 2 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other InformationNutrien is changing the meaning of an agricultural input supplier. We are developing products, services and systems that position our company to make a step-change in leading the next wave of agricultural sustainability, reducing our environmental footprint and reinforcing our commitment to diversity and inclusion (D&I). Integrated model has unique competitive advantages with improved utilization rates and supply chain efficiencies paired with well-positioned assets globally. 29 Retail 37 Potash 29 Nitrogen 5 Phosphate EBITDA Split (2019) (percent) Source: Nutrien Adjusted EBITDA ($ billions) Lower earnings volatility relative to our $3.02 peers mitigates risk for Nutrien investors and reduces the cost of capital. $3.93 $4.03 2020F Range $4.30 $3.80 2017 2018 2019 2020F Source: Nutrien Positioned to grow our business and return meaningful cash to shareholders through a disciplined “compete for capital” strategy. Free Cash Flow ($ millions unless otherwise stated) Free Cash Flow ($ millions unless otherwise stated) Free cash flow Free cash flow 2018 3.7% Dividend Yield1 Free cash flow (including changes in non-cash working capital) Free cash flow (including changes in non-cash working capital) 3.8% Dividend Yield1 2019 2018 3.7% Dividend Yield1 2019 3.8% Dividend Yield1 $1,975 $1,975 $837 $837 Source: Nutrien $2,647 $2,647 $2,157 $2,157 1 2018 and 2019 dividend yield calculated as dividend per share ($1.72/sh and $1.80/sh Source: Nutrien annualized respectively) divided by share price as at December 31, 2018 and 1 2018 and 2019 dividend yield calculated as dividend per share ($1.72/sh and $1.80/sh December 31, 2019 respectively. annualized respectively) divided by share price as at December 31, 2018 and December 31, 2019 respectively. 3 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information 2019 Financial & Operating Highlights Growing, Performing, Sustaining At Nutrien, we are growing our business – efficiently and sustainably – to create value for our stakeholders. We are raising expectations of what an agriculture company can be by improving our business today and continually positioning ourselves for tomorrow. $4.0B ADJUSTED EBITDA $2.2B FREE CASH FLOW 318RETAIL LOCATIONS ACQUIRED 2018 2019 $3.9B $4.0B 2018 2019 $2.0B $2.2B 2018 2019 53 318 $967K RETAIL EBITDA/ US SELLING LOCATION 11.5% PROPORTION OF NORTH AMERICAN SALES THROUGH THE DIGITAL PLATFORM 1 $650M ANNUAL RUN-RATE SYNERGIES ACHIEVED 2018 2019 NA $967,000 2018 2019 NA 11.5% 2018 2019 $521M $650M 1.2Mmt CAPTURED CO2 13% EMPLOYEE TURNOVER 25% PROPORTION OF FEMALE VICE PRESIDENTS AND ABOVE 2018 2019 1.1Mmt 1.2Mmt 2018 2019 14% 13% 2018 2019 19% 25% 1 North American digital Retail sales as a proportion of North American Retail sales that are available for purchase online. Find out more at nutrien.com 4 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other InformationFinancial & Operating Summary Year ended December 31 (in millions of US dollars, unless otherwise noted) 2019 2018 Change (%) Financial Performance Sales Gross Margin EBITDA Adjusted EBITDA Retail EBITDA Potash EBITDA Potash Adjusted EBITDA Nitrogen EBITDA Phosphate EBITDA Earnings (loss) per Share from Continuing Operations Adjusted Net Earnings per Share Strategic Initiatives Annual Run-Rate Synergies Free Cash Flow Dividend Payout/Free Cash Flow Adjusted Net Debt/Adjusted EBITDA Working Capital Ratio Non-Financial Performance Lost-Time Injury Frequency 1 Total Employees Employee Turnover Rate 2 Community Investment Environmental Incidents 1 Frequency based for every 200,000 hours worked. 2 2018 data was restated. n/m – Not a meaningful variance change. $ 20,023 $ 19,636 5,441 3,661 4,025 1,231 1,593 1,593 1,239 194 1.70 2.17 650 2,157 47% 2.5x 1.2 0.34 22,300 13% 17 23 $ $ $ 5,392 2,006 3,934 1,206 (203) 1,606 1,215 255 (0.05) 2.68 $ $ 521 1,975 48% 1.6x 1.4 0.34 20,300 14% 17 22 $ +2 +1 +83 +2 +2 n/m -1 +2 - 24 n/m -19 n/m +9 -1 +56 -14 – +10 -1 – +5 5 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Letter from the President and CEO Nutrien is built to deliver superior value through the agriculture cycle. We are a company that has generated and expects to generate more stable earnings than our peers and have made accretive investments through the ups and downs of the market. Through 2019, where challenging weather and escalating trade issues created headwinds for our industry, we remained focused on executing our strategic plan and demonstrating the strength of our model. Despite modest earnings growth in 2019, we used the strength of our cash flows and balance sheet to return capital to shareholders – and knowing that tremendous opportunities often emerge during challenging times – to invest in future growth. We allocated capital to expand our Retail business, repurchase shares and increase our dividend. We also made important investments in our digital capabilities which we believe will transform the Ag retail industry and further enhance our position as the global leader and strengthen the competitiveness of our crop nutrient businesses to better succeed under any market condition. Reflecting on 2019 – and looking ahead to what we expect to be an exciting new decade for the company – I believe three things are clear: Execution on our strategic plan I am extremely proud of how our employees delivered in the face of difficult market conditions in 2019. the US this year due to excessive wet weather. We were able to maintain margins and grow market share due to the strength of our sales, service and supply chain network. We completed our Merger initiatives, We also made significant progress including capturing $650 million in on our Retail digital strategy including run-rate synergies this past year. This the launch of e-commerce capability was 30 percent higher than our and integrated farm-planning tools. commitment to shareholders at the The early performance indicators time of the Merger and we captured it of these digital tools are very positive. well ahead of schedule. Our journey For example, the proportion of sales has just started, and we will continue of product available for purchase to look for opportunities to enhance online reached over 20 percent our competitive position by unlocking in the third quarter and averaged additional operational and supply chain 11.5 percent throughout the year. efficiencies across our global network. As we continue to enhance our We delivered $4.0 billion in adjusted EBITDA in 2019, up modestly from the previous year. However, free cash flow was $2.2 billion in 2019, and $2.6 billion digital offerings, we expect to serve our customers more efficiently, drive down costs, reduce working capital and grow our market share. including changes in non-cash After a strong start to 2019, our crop • Management is focused on working capital, both up significantly nutrient businesses were impacted by controlling our controllables; from the previous year. With the benefit challenging market conditions in the • We have a clear roadmap to create value for shareholders. This is embedded in our culture and we are executing in accordance with it; and • Our purpose-driven culture drives us to be a leader of sustainability in our industry. of Merger synergies and a focus on second half of the year. In Potash, we controlling costs, we were able to generated $1.6 billion of EBITDA over offset pressure from lower fertilizer the year, despite having to take prices and reduced crop input demand significant production downtime in many of our key markets this year. during the fourth quarter related to Our Retail operations, Nutrien Ag Solutions delivered strong performance, despite trade uncertainties and losing 17 million acres of seeded cropland in a temporary slowdown in demand. Despite the near-term weakness in market conditions, we expect demand to rebound in 2020, and we remain 6 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other InformationChuck Magro, President and Chief Executive Officer – Nutrien well positioned to serve our customers’ needs. Path to delivering long-term value Safety is our top priority and we made Nutrien is both integrated and strides to further infuse a culture of diversified and our business model safety throughout our organization, is designed for superior performance including by holding our first ever even during volatile market global virtual Safety, Health & conditions. Our strategy is centered Environment summit. Despite progress on growers and their needs. From in several areas we still have work to the essential nutrients we produce do as we experienced one life altering at our operations to the more than incident this year. We will be relentless 3,400 crop consultants we have in our commitment to improve our working shoulder-to-shoulder with safety performance and ensure growers around the world, we everyone goes home safe every day. have one clear objective: help our In Nutrien Ag Solutions, we have an opportunity to transform the industry through scale, efficiency and digital leadership. We allocated approximately $1.0 billion to grow our Retail footprint and enhance our offering of higher-margin proprietary products in 2019. We expect to continue to invest heavily in this business over the next five years to expand our network in core markets, including additional growth in Brazil, enhance our product and technology offerings and drive organic growth. " With the benefit of Merger synergies and a focus on controlling costs, we were able to offset pressure from lower fertilizer prices and reduced crop input demand in many of our key markets this year." customers to be more profitable, Our focus in Potash is to strengthen productive and sustainable. our industry-leading position through We have some of the world’s highest- quality, lowest-cost crop nutrient production assets, combined with an unparalleled Ag Retail distribution network. We leverage our unmatched size, scale and platform to create superior long-term shareholder value. further network optimization. We have unmatched volume optionality with the ability to ramp-up approximately 6 million tonnes of production capability at current sites with virtually no incremental investment. We also see a path to bring on additional brownfield capacity quicker and cheaper than anyone else should the 7 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Informationmarket require. In Nitrogen, we are This includes products such as our investing approximately $200 million Environmentally Smart Nitrogen to complete high-return brownfield (ESN), new ag-biological products and projects and we successfully our investment in digital tools that converted our Redwater phosphate help growers make more informed facility to an ammonium sulfate facility decisions. Our recent acquisitions on time and on budget. of Agrible and Waypoint enhance Returning cash to shareholders is also a priority for the company. We allocated $5.7 billion to shareholders through dividends and share buybacks since the inception of Nutrien at the beginning of 2018, which is unmatched in our industry. The our ability to provide real-time sustainable solutions and agronomic advice to our customers. Sustainable agriculture will shape the strategy and direction of our company – in fact, we plan to be the leader in promoting sustainable agriculture. Summary Nutrien was built to be the leading global integrated Ag Solutions provider with a unique platform for generating growth and value. It was also designed to withstand challenging market conditions and capitalize on favorable longer-term market trends. We saw a confluence of factors that created significant headwinds for global crop input demand in 2019, however, we expect the agriculture fundamentals to improve in 2020 and set us back on the cyclical stability of our Retail earnings supports We also made important investments recovery that we started to see in a steady and growing dividend. We at our production facilities including 2018. In the meantime, we remain also repurchased over 11 percent of emission controls at our nitrogen focused on factors that we can control our initial outstanding shares and will facilities, investments in mining in order to deliver long-term value evaluate future share buybacks on a automation, and expanding our for all stakeholders. compete-for-capital basis. capacity of diesel exhaust fluid that lower vehicle emissions. Finally, we are a company that thinks beyond our financial performance. We will leverage these investments We have a tremendous group of across the value chain as we build a people that work hard every day to climate-smart agriculture strategy that address some of the world’s biggest is integrated into the long-term plans sustainability challenges. By doing for each of our business units. Later so we play our part in delivering Ag in 2020, we expect to provide more Solutions to Feed the Future. detail on our Environmental, Social and Governance (ESG) strategy and targets for reducing emissions across our value chain. Nutrien is committed to promoting Thank You a diverse and inclusive workforce Chuck Magro and our D&I strategy extends this President and Chief Executive Officer February 19, 2020 principle to our supply chain, local communities and the agriculture sector. We are committed to the 30% Club principles of promoting gender diversity on our Board. We have been recognized as a top employer nationally and strive to continue to develop our people and our human resources processes. Leader in Sustainability Our purpose, grow our world from the ground up, defines our people, our strategy and the role we play as a leader in sustainability. We have three clear sustainability priorities: lead innovation in sustainable agriculture, reduce our environmental footprint, and champion D&I in the Ag industry. " We continue to make significant investments in the area of sustainability. We have built a portfolio of products and solutions that help growers make their operations more sustainable." 8 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other InformationManagementʼs Discussion & Analysis As at and for the year ended December 31, 2019 12 Strategy 21 Operating Segment Performance & Outlook 22-27 Retail 28-33 Potash 34-39 Nitrogen 40-43 Phosphate 44 Corporate & Others 45 Financial Overview The following management’s discussion and analysis (“MD&A”) is the responsibility of management and is dated as of February 19, 2020. The Board of Directors of Nutrien carries out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews and, prior to its publication, recommends to the Board of Directors approval of this disclosure. The Board of Directors has approved this disclosure. The term “Nutrien” refers to Nutrien Ltd. and the terms “we,” “us,” “our,” “Nutrien” and “the Company” refer to Nutrien and, as applicable, Nutrien and its direct and indirect subsidiaries as a group. This MD&A is based on the Company’s audited consolidated financial statements for the year ended December 31, 2019 (“financial statements”) prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) unless otherwise stated. This MD&A contains certain non-IFRS financial measures which do not have a standard meaning under IFRS and, therefore, may not be comparable to similar measures presented by other issuers. Such non-IFRS financial measures include: • EBITDA, Adjusted EBITDA and Potash Adjusted EBITDA • Adjusted net earnings and adjusted net earnings per share • Adjusted EBITDA and adjusted net earnings per share guidance • Free cash flow and free cash flow including changes in non-cash working capital • Gross margin excluding depreciation and amortization per tonne - manufactured • Potash cash cost of product manufactured • Ammonia controllable cash cost of product manufactured • Adjusted net debt • Retail adjusted average working capital to sales • Retail cash operating coverage ratio • Retail normalized comparable store sales • Retail EBITDA per US selling location • Nutrien Financial receivables • Debt-to-capital ratio (see disclosures on page 53) For definitions, further information and reconciliation of these measures to the most directly comparable measures under IFRS, see “Non-IFRS Financial Measures” beginning on page 63. Also see the cautionary statement on forward-looking information on page 62. All references to per share amounts pertain to diluted net earnings (loss) per share. Financial data in this annual report are stated in millions of US dollars which is the functional currency of Nutrien and the majority of its subsidiaries unless otherwise noted. N/m indicates information that is not meaningful. See pages 134 and 135 for definitions, abbreviations and terms used in the annual report. Additional information relating to Nutrien (which, except as otherwise noted, is not incorporated by reference herein), including our Annual Information Form for the year ended December 31, 2019, can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The Company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission (the “SEC”). The information contained on or accessible from our website or any other website is not incorporated by reference into this MD&A or any other report or document we file with or furnish to applicable Canadian or US securities regulatory authorities. 9 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information We will provide industry-leading Ag Solutions to Feed the Future. We have operations and investments in 14 countries, with over 22,000 employees and more than 500,000 grower accounts worldwide. We operate the world’s premier Ag Retail network, supplying growers with the latest products, services and technology. As the world’s largest producer of fertilizers, we have some of the highest-quality and lowest-cost production assets. Our extensive supply chain allows us to deliver products to the market with improved efficiency. Nutrienʼs Global Profile North America Redwater, AB SASKATOON, SK Fort Saskatchewan, AB Joffre, AB Carseland, AB CALGARY, AB Vanscoy, SK Patience Lake, SK Lanigan, SK Cory, SK Allan, SK Standard, AB Granum, AB Rocanville, SK REGINA, SK Winnipeg, MB Kennewick, WA Billings, MT HAWAII LOVELAND, CO Biola, CA Ontario, CA Weeping Water, NE Marseilles, IL Greeley, CO Fairbury, NE Borger, TX Joplin, MO Osceola, AR Greenville, MS NORTHBROOK, IL Lima, OH Cincinnati, OH New Madrid, MO Denton, TX Americus, GA Aurora, NC Augusta, GA Geismar, LA White Springs, FL HAWAII Retail Potash Nitrogen Phosphate Environmentally Smart Nitrogen® (ESN) Granulation Upgrade Facility Loveland Products & Affiliated Facilities Agrichem Investments & Joint Ventures OFFICES 10 Nutrien Annual Report 2019 Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information To view and download our Industry Factbook, visit https://www.nutrien.com/ resources To view A Day in the Life of Nutrien Ag Solutions, visit https://www.nutrien.com/what- we-do/our-business/retail To view the Nutrien Potash Facility Tour, visit https://www.nutrien.com/what- we-do/our-business/potash Fact Book 2019 Point Lisas Trinidad and Tobago Point Lisas Trinidad and Tobago South America Agrichem, Ribeirão Preto, Brazil SÃO PAULO, BRAZIL Africa/Asia MOPCO, Damietta, Egypt Australia LAS CONDES, CHILE Casilda, Argentina MARTÍNEZ, ARGENTINA Profertil S.A., Bahía Blanca, Argentina Agrichem, Ribeirão Preto, Brazil SÃO PAULO, BRAZIL Kwinana, Australia FREMANTLE, AUSTRALIA EIGHT MILE PLAINS, AUSTRALIA MACQUARIE PARK, AUSTRALIA LAS CONDES, CHILE Casilda, Argentina MELBOURNE, AUSTRALIA Melbourne, Australia Dandenong, Australia MARTÍNEZ, ARGENTINA Profertil S.A., Bahía Blanca, Argentina Nutrien Annual Report 2019 11 Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Nutrienʼs Strategy Nutrien’s strategy begins with the depth and breadth of our unique portfolio of assets that span the crop input and services value chain. As the leading diversified and best positioned company in the crop input Ag sector, our strategy focuses on creating value through the cycle and developing a platform for growth while minimizing risks. This creates cost, revenue and supply chain synergies that deliver value for our customers and other stakeholders. Building a unique relationship with the grower Create the best channel to the customer Own the leading production assets and proprietary offerings We are the leading retailer of crop We unlock value through integration We own and operate the world’s inputs and services across key Ag and innovation across our supply leading fertilizer assets with 25 million markets where we operate with an chain and our approach to market. tonnes of sales in 2019, which have award-winning digital platform and The types of products and services significant cost and/or market over 3,400 agronomists serving we offer require significant supply advantaged positions. We have growers from more than 2,000 retail chain investments, particularly given approximately 6 million tonnes of locations across North America, the seasonal nature of our industry. additional available potash capacity South America and Australia. We In North America alone, we have which we expect to draw upon in enrich our relationships by offering more than 1,800 distribution points the coming years. We are optimizing our customers a full suite of solutions with approximately 6.3 million tonnes our production assets to lower costs, to meet their needs. Technology, of storage capacity. We are further investing in high-return nitrogen innovation and data are integral to solidifying our leading position in the brownfield capacity expansions and providing Ag Solutions to Feed the marketplace and expanding our reach implementing technologies across Future, which is why we have a clear to customers through a tuck-in our business to reduce carbon vision for developing the leading acquisition and consolidation strategy emissions. We also develop value- digital agricultural platform supported in North America, a growth strategy in enhancing offerings that help by our people, products, extensive Brazil and integrating Ruralco into our growers optimize yields and distribution network and systems. business in Australia. address challenges. >2,000 RETAIL LOCATIONS WORLDWIDE >1,800 NORTH AMERICAN DISTRIBUTION POINTS >500,000 GROWER ACCOUNTS >1,850 PROPRIETARY PRODUCTS ~25Mmt NUTRIENT SALES 12 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Priorities & Performance We focus on several key priorities to support the execution of our corporate strategy and deliver superior long-term results for our stakeholders. In each of these areas we set clearly defined targets and performance metrics that measure our progress. Our strategy and performance are supported by governance oversight and risk management by our leaders and Board of Directors. Sustainability 14-15 Growth & Capital Allocation 16-17 Be at the forefront of Ag related Environmental, Social and Governance (ESG), including building a climate-smart agricultural strategy Grow our business and create value by more efficiently allocating capital through the cycle Innovation & Technology 18-19 Employees Drive growth through innovation and digital solutions Foster a purpose-driven culture that supports growth, diversity and inclusion 20 13 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Sustainability Sustainability Initiatives LEAD THE NEXT WAVE OF SUSTAINABLE AGRICULTURE MINIMIZE OUR ENVIRONMENTAL FOOTPRINT Acquired Actagro and Agrible Baselining our environmental – companies that focus on impact, implementing soil and plant health and efficiency projects and enable analysis of on-farm developing a long-term Find out more at nutrien.com/sustainability CHAMPION DIVERSITY AND INCLUSIVE GROWTH IN THE AGRICULTURE INDUSTRY Addressing D&I across our company, value chain and communities where sustainability practices. environmental strategy. we operate. Nutrien is integrating sustainability across the company by focusing on three priorities that contribute to the United Nations Sustainable Development Goals. 2019 Performance Actagro SUSTAINABLE AG SOLUTIONS ACQUISITION 1.2Mmt CAPTURED CO2 25% PROPORTION OF FEMALE VICE PRESIDENTS AND ABOVE 14 Nutrien Annual Report 2019 Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Sustainable Agriculture Our goal is to lead the next wave of sustainability in agriculture by developing solutions for our customers that increase crop yields, enhance their profitability and enable greater environmental stewardship. We aim to accomplish this goal through three key areas: 1. Develop solutions that increase nutrient availability and uptake by crops, improving productivity and crop resilience and reducing overall losses to the environment. Our 2019 acquisition of Actagro, a manufacturer of environmentally sustainable soil and plant health products and technologies, Environmental Footprint Nutrien is committed to reducing its environmental footprint and has established a baseline to understand our current state and identify future areas of opportunity and investment. Reducing our footprint means we are focused on air emissions, water usage and discharge, and waste. Climate change is a key focus for Nutrien and we are committed to reducing greenhouse gas (GHG) emissions within our operations and across our value chain. Fertilizer production, especially nitrogen fertilizer, generates GHG emissions; is expected to contribute to growth and progress. 2. Enhance the data linkage between growers and downstream partners, such as food production companies and carbon markets. Our goal is to increase the data and analytical capabilities for on-field sustainability information tracking and enable insight and connectivity through our industry- leading Retail digital tools. The acquisition of Agrible in 2018 adds field-level predictive analytics to our digital platform enabling farmers to quantify their performance and pursue opportunities for continuous improvement. In 2019, we began the integration of this tool into our digital platform for a broad customer roll-out. 3. Collaborate with our stakeholders to enable the uptake of best practices. This approach requires collaboration at multiple levels, including with government, regulatory agencies and international and local non- governmental organizations. however, nitrogen is critical for healthy crops and soil organic carbon. Agricultural practices that increase yield on land reduce pressure to convert additional land to food production. Improved fertilizer use efficiency contributes to soil health and makes a positive impact to climate change by sequestering carbon naturally. This year, we obtained external assurance on our 2018 baseline scope 1 and 2 GHG emissions, which we expect to be provided in our 2020 ESG Report. We are also engaged in assessing our scope 3 GHG emissions inventory. Later in 2020, we plan to provide more detail on our climate strategy and targets for reducing emissions across our value chain. Water is important to our operations and is primarily used in our fertilizer production facilities and we are taking action to reduce our water use and increase water recycling. Examples include recycling water in a closed-loop system, using on-site collection ponds, and in some cases, using non-potable water sources to reduce intake of fresh water. Diversity and Inclusive Growth Nutrien is committed to diversity and inclusion within our workforce, our supply chain, local communities and the agricultural sector. D&I is an important component of how we deliver on our goal to be the leading integrated Ag Solutions provider. We aspire to lead in diversity and inclusion by focusing on a world class approach which links inclusion with our global sustainability agenda. This means our strategy includes both internal and external efforts and advocacy and collaboration with multiple stakeholders. A key component is our focus on advancing our workforce diversity efforts through attracting, developing and engaging talent and creating an inclusive culture. In addition, we work to advance supplier diversity, partnerships and community advocacy for inclusion. An example of this is our Aboriginal Engagement strategy which focuses on opportunities in our workforce, supply chain and community investment. In 2019, Nutrien renewed its partnership with the Saskatoon Tribal Council. Through a memorandum of understanding, Nutrien continues a commitment to initiatives and events that ensure our Indigenous partners share in opportunities both as employees and as suppliers. 15 Nutrien Annual Report 2019 Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Growth & Capital Allocation Growth & Capital Allocation Initiatives SAFE AND RELIABLE ASSETS Efficiently maintaining our assets and managing associated costs to provide safe and reliable production to optimize returns. GROW COMPETE FOR CAPITAL Expanding our footprint Prudently allocating and optimizing our business capital to the best risk to provide stable and adjusted opportunities growing financial returns to lead future growth while minimizing risk and and increase cash returns protecting our balance sheet. to shareholders. Nutrien is focused on financial growth and creating long-term value through capital allocation. We believe our integrated model provides greater opportunity to allocate capital more efficiently through the cycle and provide superior financial returns for shareholders. 2019 Performance $1.0B SUSTAINING CAPITAL EXPENDITURES ~50% OF CAPITAL DEPLOYMENT TO DIVIDENDS AND SHARE REPURCHASES $3.0B CASH USED FOR DIVIDENDS AND SHARE REPURCHASES $2.0B ACQUISITIONS, INVESTMENTS AND GROWTH PROJECT SPENDING 16 Nutrien Annual Report 2019 Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information 1 2 3 4 Sustain Our Assets Protect the Balance Sheet Stable, Predictable and Growing Dividends Compete for Capital Nutrien’s capital allocation strategy is simple and clear. The first priority is to sustain our assets to ensure that we have safe and reliable operations. Sustaining capital spending totaled $1.0 billion in 2019, which is in line with our depreciation.1 The next priority is to protect the balance sheet. We target an investment- grade credit rating throughout the cycle which provides reliable access to capital and financial flexibility, allowing us to be opportunistic when value-enhancing opportunities arise. We are focused on delivering to shareholders a stable, predictable and growing dividend underpinned by growth in our Retail business unit. We have increased the dividend twice since Nutrien’s inception and target a payout range of 40 to 60 percent of free cash flow through the cycle. We allocate the remaining free cash flow on a compete for capital basis. Our internal approval process and strict hurdle rates ensure that we are allocating capital to the best alternatives on a risk adjusted basis. Nutrien’s long-term financial growth is primarily within our control by investing in our world class Retail distribution network, growing our crop nutrient production and optimizing the combined network. Firstly, we are expanding our Retail footprint in key regions and unlocking value by leveraging the scale of our existing platform which is expected to provide stable and growing earnings. Secondly, we have a clear strategy and measurable goals for optimizing crop nutrient production by reducing costs and investing in low-cost and low-risk expansion projects. As we optimize and expand capacity, earnings leverage to crop nutrient price recovery increases significantly. During low points of the cycle, we expect to focus on growing our crop nutrient production, distributions to shareholders and transformational opportunities. At the high points of the cycle, we expect to focus on organic growth opportunities and reducing leverage. The stability of Retail allows us to keep growing this business and our dividend throughout the cycle. In 2019, we allocated approximately $1.0 billion to grow our Retail footprint and product offering in the US and Australia. We also returned $3.0 billion to shareholders through share repurchases and dividends. 2019 Capital Allocation (percent) 17 Dividends 17 Sustaining Capital 15 Investing & Other Capital 32 Share Repurchases 19 Acquisitions/Purchased Investments Source: Nutrien 1 Depreciation excluding the impact of PPA adjustments as a result of the Merger and depreciation of right-of-use assets recognized upon adoption of IFRS 16 "Leases". 13 Sustaining Capital 15 Dividends 39 Share Repurchases 17 20 Acquisitions/Purchased Investments 12 Investing & Other Capital Nutrien Annual Report 2019 Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Innovation & Technology Innovation & Technology Initiatives RETAIL DIGITAL PLATFORM Our digital platform aims to provide the leading digital offering to growers. NEXT GENERATION POTASH We are adopting innovative mining tools and creating ways to increase productivity, lower costs and create a safer work environment for our people. PRODUCT INNOVATION Develop solutions that increase nutrient availability and uptake by crops, improving productivity and crop resilience and reducing overall losses to the environment. We invest in new products, processes and digital solutions to better serve our customers, increase efficiency, improve employee safety and deliver environmental benefits. Providing Ag Solutions to Feed the Future requires us to expand the boundary of the current state of agriculture. 2019 Performance 11.5% PROPORTION OF NORTH AMERICAN SALES THROUGH THE DIGITAL PLATFORM $63 POTASH CASH COST OF PRODUCT MANUFACTURED PER TONNE +150 NEW PROPRIETARY PRODUCTS IN 2019 18 Nutrien Annual Report 2019 Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Retail Digital Platform We are investing over $60 million per year to deliver the leading digital platform in the Ag retail sector. The platform provides our customers with a one-stop shop for account management, farm planning, agronomic tools, ecommerce and crop input financing. North American Retail customers representing approximately $6.6 billion in annual sales are currently signed up on the platform. Payments made through the customer portal reached $336 million in 2019. As we continue to enhance our digital offerings we expect to more efficiently serve our customers, drive down supply chain costs, reduce working capital and increase our share of the market while leading sustainable agriculture initiatives in our industry. Next Generation Potash Program Our goal is to operate the safest, most efficient, lowest-cost potash operations in the world. We launched a series of initiatives to improve our potash operations. Through operational excellence, we aim to improve processes from the mine face to the mill and our logistic channels. We expect to leverage data analytics and automation to drive more value. Our operations are implementing and piloting initiatives with a focus on autonomous mining, advanced process control, dynamic scheduling, connected workforce, and predictive maintenance. We anticipate these initiatives will enhance the safety of our operations and will lower costs by leveraging these technologies as we ramp up production. Product Innovation We have invested in more than 1,850 proprietary products, including patented technologies in crop nutrients, crop protection, biocatalysts and seed. We develop these products at the more than 30 facilities dedicated to innovation, breeding and associated production. Nutrien developed ESN, the market’s leading controlled release nitrogen product, and continues to focus on the innovation of new fertilizer products including ag-biologicals that provide both agronomic and environmental benefits. This year we also introduced a Smart Nutrition MAP – a micronized sulfur MAP which speeds sulfur delivery to the plant and reduces the potential for sulfur loss. 19 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Employees Employees Initiatives LEADERSHIP AND TALENT DEVELOPMENT Launching a global leadership development framework which includes development programming for all levels of employees. EMPLOYEE EXPERIENCE Focusing on the experience of Nutrien employees informed by frequent and focused listening events upon which action is taken. DIVERSITY & INCLUSION Continued focus on increasing diversity within the organization and increasing our employees’ experience of inclusion. Our strategy is to attract, develop and engage skilled and diverse employees who are committed to Grow Our World from the Ground Up. Our focus on employee development, D&I, engagement and wellness nurtures the best ideas and attracts the best talent to help achieve our purpose. Leadership and Talent Development 2019 marked the implementation of a customized Nutrien global Leadership Development Program. The program will be cascaded across Nutrien, and will focus on developing authentic leadership, leading in accordance with Nutrien’s key principles, and increasing leaders’ knowledge of Nutrien’s integrated business model. Focused efforts are underway to provide supporting development programming at all levels across Nutrien, to reinforce and develop leadership behaviors aligned with the organization’s values and engagement principles. 2019 Performance Employee Experience Diversity & Inclusion In 2019, we continued harmonization of our people programs and focused on managing and monitoring the experience of our employees through frequent listening activities. We conducted nine formal listening events with various employee groups involving nearly 19,000 individuals and used the results to prioritize our efforts to improve the employee experience. In 2020, we will continue to use employee listening as a driver to improve all aspects of the employee experience, with a targeted focus on the wellness of our employees; physically, mentally, financially, and through the community. A diverse and inclusive workforce provides a sense of belonging for our employees, enhances our organizational strength and better reflects our customers and stakeholders. We have a strategy of increasing representation of underrepresented groups and ensuring employees feel valued and respected. In 2019 we set defined goals of having 30 percent female Vice Presidents by the end of 2020 and 20 percent female Senior Leaders by the end of 2022. In 2020, we will increase our efforts to attract women and individuals with military experience in North America and continue to focus on the recruitment of Aboriginal people in Canada. 13% EMPLOYEE TURNOVER 19,000 INDIVIDUALS INVOLVED IN LISTENING EVENTS $17M SPENT ON COMMUNITY INVESTMENT 20 Nutrien Annual Report 2019 Operating Segment Performance & Outlook We report our results in four operating segments: Retail, Potash, Nitrogen and Phosphate. • • • Our reporting structure reflects how we manage our business. In the first quarter of 2019, our Executive Leadership Team reassessed our product groupings and decided to evaluate the performance of ammonium sulfate as part of the Nitrogen segment, rather than the Phosphate and Sulfate segment as previously reported in 2018. Net earnings (loss) from continuing operations before finance costs, income taxes, and depreciation and amortization ("EBITDA") is the primary profit measure used to evaluate performance and allocate resources in each of our operating segments. Net sales (sales revenues less freight, transportation and distribution expenses) is the primary revenue measure used in planning and forecasting in the Potash, Nitrogen and Phosphate operating segments. 22-27 Retail 28-33 Potash 34-39 Nitrogen 40-43 Phosphate 44 Corporate & Others 21 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Retail 2% RETAIL EBITDA GROWTH IN 2019 318 NUMBER OF RETAIL LOCATIONS ACQUIRED IN 2019 $967K RETAIL EBITDA PER US SELLING LOCATION 11.5% PROPORTION OF NORTH AMERICAN SALES THROUGH THE DIGITAL PLATFORM 22 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other InformationOverview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Retail Operating Environment R Our Business Our Retail business provides a complete set of crop input products and solutions, including seed, crop protection, fertilizers and other crop inputs, as well as associated services, agronomic advice, financing and leading-edge digital capabilities. As the world’s largest retail distributor of crop inputs, we operate more than 2,000 retail locations across the US, Canada, Australia and key areas of South America. Our operations service more than 500,000 grower accounts globally and over 100 crops, with corn, soybeans, wheat and canola accounting for the majority of our business. We have more than 3,400 agronomists and field experts working directly with growers to help optimize crop yields and maximize economic returns from their farm businesses. Our digital platform aims to provide the leading digital offering to growers, improve ease of doing business and provide unprecedented insight for our customers with the goal of adding advisory value at each stage of the growing season. Our experts help growers implement sustainable management practices based on a thorough understanding of soils, climate conditions and crop requirements, and by utilizing our portfolio of leading products and services. We also manufacture and sell a full range of advanced proprietary crop protection products and nutritionals that provide farmers with a portfolio of useful and competitive choices to successfully grow and protect their crops and livestock. Proprietary products also provide meaningfully higher margins than national brand offerings as we procure and blend the products at seven formulation facilities across our key markets. Our Strategy We are focused on being the Ag Retailer of the future by creating the leading channel to the customer and further enhancing our relationship with the grower. We will leverage our position as the largest Ag Retailer by combining a strong local presence with the responsiveness of our world-class supply chain and whole-acre solutions. In 2019, we established a five-year strategy to enhance our Retail platform and set out four key pillars to guide our pathway to transforming our relationship with the grower. Further Consolidate the Retail Industry: We expect to continue to make strategic acquisitions in our key target markets and leverage our scale, experience, supply chain and whole-acre solutions to create additional value for our customers. Create the Leading Ag Retail Digital Platform: We expect to offer growers the leading products, agronomic services and digital interface. We intend to further enhance our award-winning digital platform by creating value-added features, expanding our credit offering for growers and by entering into strategic partnerships. Drive Organic Growth and Increase Efficiency: Through optimization of our supply chain and leveraging unprecedented insight from our digital platform, we expect to improve efficiency. We intend to further strengthen Nutrien Financial capabilities and provide customers with a seamless purchasing and planning experience. Enhance Proprietary Product Offering: We aim to enhance our product portfolio through innovation, collaboration and focused acquisitions to provide comprehensive solutions to growers including innovative and sustainable specialty products. 23 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information 2019 Performance In 2019, we finalized a number of accretive acquisitions including Ruralco, the third largest Ag Retailer in Australia, and Actagro, a manufacturer of environmentally sustainable soil and plant health products and technologies. We also completed numerous tuck-in to add new functionality that includes crop acquisitions in North America and Australia, planning, field level insight and crop input and established an office in Brazil where we recommendations. We offer to our customers are building out our network. This includes flexible financial solutions in support of greenfield location builds and progressing on Nutrien’s agricultural product and service our pipeline of acquisition opportunities. sales. We manage our credit portfolio through We enhanced our award-winning digital Nutrien Financial. platform by adding online purchasing, account During a notably difficult growing year, we payment and management, and advisory increased our Retail EBITDA per US selling services. Through 2020 and 2021, we intend location and grew our digital platform. Digital Progress (2019 North America) Purchasing of key crop protection products, order online or have your agronomist do it on your behalf Pay bills online, look up past purchases, see account balances, downloadable for tax/banking purposes >60% Proportion of North American revenue from customers signed up on the Digital Platform Notifications of new statements, invoices and licenses/permits $260M Retail sales ordered through the digital platform Latest weather outlook & grain market information Farm insight app with current spray conditions, radar for rain & temp, last 24 hours of rainfall, and national rainfall layers $336M Customer payments made through the Customer Portal Competitive Landscape The retail landscape in most developed agricultural markets is comprised of numerous competitors of differing size and ownership structure. Most markets are fragmented and we believe In North America and Australia, we compete scale and size are required in order to meet with mid-sized national retailers, co-operatives evolving grower needs. Growers want a full and smaller independent operations. In suite of products, services and solutions, rooted Brazil, the market is characterized by smaller in sound unbiased agronomic advice and independent owners and represents an analytics, stressing the importance of timely opportunity for larger retailers, including delivery and reliability of supply. Nutrien, to enhance the product, service and solution offerings to growers. 24 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information R 2019 Market Conditions Unprecedented precipitation in North America in the of the US-China trade dispute and the African Swine first half of 2019 impacted planting and pressured crop Fever in China. input demand. Strong South American soybean and corn production in Growers in the US claimed a record 20 million acres in 2019 offset some of the production losses in the US, but Prevented Plantings in 2019, driven by record precipitation Brazilian crop inventories ended the year historically low. during the planting season. Not only did record area go Tight soybean and corn inventories provided support for unplanted, but many growers were unable to apply local crop prices and in turn crop input demand. pre-plant herbicide and fertilizers. Drought continued to negatively impact Australian Lower US acreage and poor early crop development crop production, driving wheat yields approximately conditions significantly reduced US corn and soybean 20 percent below long-term trend levels and creating a production in 2019, which began to support crop prices. headwind for Australian crop input demand. Considering Strengthening crop prices were, however, capped by the historical severity of the drought, both crop yields weak global demand driven, in part, by continued impacts and crop input demand have been very resilient versus historical drought events. Market Outlook We expect a rebound in US crop acreage will support Soybean production in Argentina and Brazil are expected increased crop input demand in 2020. to be at or near record levels, supported by favorable We expect US growers will return to historic planting acreage in 2020, including approximately 94 million acres of corn and 85 million acres of soybeans. This alone represents an increase of more than 14 million acres from 2019 levels. Additionally, we anticipate higher North American fertilizer application rates in 2020, driven by improved affordability and lower than normal fall application in parts of the US and Canada due to a delayed harvest and challenging fall weather conditions. Grower sentiment is positive, and we expect this to support higher than normal spring fertilizer applications for all primary nutrients. growing conditions. Additionally, we expect growers in Brazil to increase Safrinha corn planting supported by strong local prices. We expect strong production will result in high nutrient removal and support crop input demand in 2020. Weather will continue to be an important factor as higher planting in North America and South America will require more normal weather conditions. Precipitation in Australia has recently improved, however, conditions during the winter crop growing season will be critical to 2020 crop production. Key Crop Grower Cash Margins (local currency margin/acre) US Corn US Key Crop Grower Cash Margins Cotton 400 (local currency margin/acre) US Soybean US Wheat CDN Canola BRZ Soybeans US Corn US Soybean US Wheat US Cotton CDN Canola BRZ Soybeans 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F 2 0 1 7-2 0 2 0 F Source: USDA, IMEA, Doane, Nutrien 300 200 400 100 300 0 200 -100 100 0 -100 1,600 1,200 800 1,600 400 1,200 0 800 400 0 Retail EBITDA & Margin1 (percent) ($ millions) Retail EBITDA Margin Retail EBITDA 2020 EBITDA Guidance Range $1,119 $1,033 $1,091 8.6% 8.5% 9.3% $951 $986 8.3% 8.3% $769 $524 7.5% 7.5% $1,500 $1,145 $1,206 $1,231 $1,400 9.5% 9.6% 9.3% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F Source: Nutrien 1 2011-2016 data is based upon Agrium Inc. financials and 2020F on the annual guidance range provided on February 18, 2020. Source: USDA, IMEA, Doane, Nutrien 25 Nutrien Annual Report 2019Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Retail Financial Performance (millions of US dollars, except as otherwise noted) Sales Crop nutrients 1 Crop protection products Seed Merchandise 2 Services and other Cost of goods sold 2 Gross margin Expenses 3 Earnings before finance costs and taxes (“EBIT”) Depreciation and amortization Dollars Gross Margin Gross Margin (%) 2019 2018 % Change 2019 2018 % Change 2019 2018 4,989 4,983 1,712 598 939 4,577 4,862 1,687 584 810 13,221 12,520 9,981 3,240 2,604 636 595 9,485 3,035 2,328 707 499 1,032 1,173 336 109 590 923 1,155 333 103 521 3,240 3,035 12 2 1 6 13 7 21 24 20 18 63 25 20 24 20 18 64 24 9 2 1 2 16 6 5 7 12 (10) 19 2 EBITDA 1,231 1,206 1 Includes intersegment sales. See Note 3 to the financial statements. 2 Certain immaterial figures have been reclassified or grouped together for the year ended December 31, 2018. 3 Includes selling expenses of $2,484 million (2018 – $2,303 million). The most significant contributors to the changes in our Retail financial performance were as follows: 2019 vs 2018 Crop nutrients Crop protection products Sales increased primarily due to higher volumes sold in the US due to acquisitions and from higher selling prices in the first half of the year, more than offsetting reduced sales volumes due to unfavorable weather conditions particularly in the US and Canada. Gross margin percentage increased due to strategic purchasing and an increase in the proportion of higher-margin specialty and proprietary products sold. Sales increased primarily due to higher herbicide and fungicide applications in the US due to excessive moisture experienced in the fall of 2018 as well as favorable changes in sales mix. Gross margin percentage was flat as favorable changes in the product sales mix and strategic purchasing were offset by the impact of higher competition in a condensed season and higher cost of raw materials sourced from China. Seed Sales increased primarily due to increased sales of higher-priced corn and cotton seeds which more than offset the impact of lower total planted acreage in the US. Merchandise Sales increased due to our recent acquisition of Ruralco. Services and other Sales increased due to an increase in US application services required as a result of a condensed application season and sales from recent acquisitions, including Ruralco. Gross margin percentage was lower due to changes in product mix from the Ruralco acquisition more than offsetting the increase in higher-margin US application services. Selling expenses Expense increased due to higher sales from acquisitions; however, expense as a percentage of sales was relatively flat. EBITDA EBITDA was higher primarily due to higher sales and gross margin and the impact of adopting IFRS 16 “Leases”, which caused a decrease in lease expenses and a corresponding increase in depreciation and amortization, more than offsetting higher selling expenses. 26 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information R Selected Retail Measures Proprietary products margin as a percentage of product line margin (%) Crop nutrients Crop protection products Seed All Products Crop nutrients sales volumes (tonnes – thousands) North America International Total Crop nutrients selling price per tonne North America International Total Crop nutrients gross margin per tonne North America International Total 2019 2018 23 34 38 24 8,812 2,236 11,048 465 398 452 102 60 93 21 37 38 25 8,547 2,142 10,689 437 395 428 94 57 86 Financial performance measures 2019 Target 2019 Actuals 2018 Actuals Retail EBITDA to sales (%) 1 Retail adjusted average working capital to sales (%) 1 Retail cash operating coverage ratio (%) 1 Retail EBITDA per US selling location (thousands of US dollars) 1 Retail normalized comparable store sales (%) 1 Retail digital platform sales to total sales 2 Retail grower engagement 3 10 20 60 9 23 62 967 (1) 11 5 10 21 59 n/a (1) n/a n/a 1 Rolling four quarters ended December 31, 2019 and December 31, 2018 respectively. 2 Grower and employee orders directly from the digital platform. 3 Percent of North American Retail growers doing one or more significant activities on the digital platform, such as ordering products, making payments, applying for Nutrien Finance or completing a farm plan. Nutrien Financial We offer flexible financing solutions to our customers in support of Nutrien’s agricultural product and service sales. Retail customers in the United States are offered extended payment terms, typically up to one year, to facilitate the alignment of grower crop cycles with cash flows. We manage our credit portfolio based on a combination of customer credit metrics, past experience with the customer and by managing exposure to any single customer. Retail receivables segregated in Nutrien Financial have the lowest risk of default of Retail receivables and typically offer lower financing costs for our customers. The balance of our Retail receivables are subject to marginally higher credit risk. (millions of US dollars) Nutrien Financial receivables As at December 31, 2019 Current 31-90 days past due >90 days past due Allowance 1 Total 799 24 3 (5) 821 1 Bad debt expense on the above receivables was $5 million for the year ended December 31, 2019. Nutrien Annual Report 2019 27 Potash 73% GROSS MARGIN PER MANUFACTURED TONNE (EXCL DEPRECIATION AND AMORTIZATION) $63 POTASH CASH COST OF PRODUCT MANUFACTURED PER TONNE +6Mmt AVAILABLE CAPACITY 28 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other InformationOverview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Potash Operating Environment K Our Business Nutrien is the world’s largest producer of potash with approximately 21 percent of global potash capacity. We have access to decades of low-cost reserves from our six potash mines in Saskatchewan. In 2019, we produced 11.7 million tonnes We have the most extensive distribution of potash. We have approximately 6 million network, including our own Retail operations, tonnes of incremental available operational warehouse and transportation assets and capacity - a unique advantage in the our investment in Canpotex, which provides industry giving us the flexibility to respond low-cost marketing and logistics to the quickly and efficiently to both short-term approximately 40 international markets market requirements as well as long-term it serves. demand growth. Nutrien’s potash mines represent some of We also have the ability to add 5 million tonnes the lowest-cost and highest-quality mines in of incremental brownfield capacity that are the world. We take great care to ensure our estimated to be at much lower cost and which mines run at optimal levels and to undertake takes much less time to complete than a preventative maintenance to maximize safety greenfield project. and to minimize unscheduled downtime. Our Strategy At Nutrien, we are strengthening our position as the world’s largest underground soft rock miner and as the potash industry leader by optimizing our network, reducing costs, implementing leading technologies and leveraging our extensive capacity to capture market growth. Network optimization: Next Generation Potash: We are optimizing our potash network to We aim to be the safest and lowest-cost potash capitalize on the production flexibility of our producer through operational excellence, six low cost mines and our global distribution digitized operations and technology leadership. network and to leverage the benefits of We are adopting innovative mining tools and Nutrien’s integrated model. creating means to increase productivity, lower costs and create a safer work environment for our people. Incremental capacity: We will use our existing production platform, which includes 6 million tonnes of additional available capacity to capture incremental share of new market demand. We also have 5 million tonnes of incremental brownfield capacity that we can develop in half the time and at a fraction of the cost of a conventional greenfield mine to meet longer term demand growth. 29 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information 2019 Performance We continue to enhance our network by effectively managing our supply chain and optimizing volumes to minimize costs while meeting our customers’ needs. In 2019 we progressed our Next Generation advance projects to increase network flexibility, Potash program by implementing and piloting improve ore recovery and quality, and improve several initiatives at our operations in the efficiency as we increase volumes. areas of digital tools, advance process control and automation. We gained insight on how these initiatives can improve safety, cost and efficiency across our production network as production increases. Additionally, we plan to We remain focused on optimizing production across our entire mine network which includes improving productivity at our lower cost mines. Potash Operational Capability (million tonnes) North America Offshore via Canpotex 6 low-cost mines in Canada 5 offices around the world +6 Mmt 12 Mmt1 Source: Nutrien 1 Represents 2019 finished product production. Integration with our Retail network Access to 4 different marine terminals ~6,100 Railcars >5,200 Railcars ~300 strategically located distribution points >550Kmt dry storage capacity at port 100Kmt Hammond, IN warehouse distribution facility – strategically located for key markets >225 vessel voyages each year Competitive Landscape Potash is found in significant quantity and quality in a limited number of countries. Canada has the largest known global potash reserves and accounts for approximately 35 percent of global capacity. More than 70 percent of the world’s potash The demand growth rate for potash has capacity is held by the six largest producers. outpaced that of other primary nutrients, Our primary competitors are located in Belarus, averaging an approximately 2.5 percent CAGR Canada, Germany, Israel, Jordan and Russia. since 2000 despite demand in 2019 declining Most major potash consuming countries in Asia and Latin America have limited or no indigenous production capability and rely on imports to meet their needs. This is an important difference between potash and other major crop nutrient businesses. Trade typically accounts for approximately three-quarters of demand for potash, resulting in a globally diversified marketplace. from record levels seen in 2018. This growth is driven by the increasing nutrient requirements of higher yielding crops and improving soil fertility practices, particularly in emerging markets where potash has been historically under-applied and crop yields lag. 30 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information 2019 Market Conditions World potash demand softened in 2019 due to adverse Chinese port inventories, which pressured imports in the weather in North America, weak palm oil prices and a second half of the year. drawdown in customer inventories in late 2019. The combination of weaker demand in these markets and Global potash shipments in 2019 are estimated at the delayed monsoon in India, led to increased levels of approximately 64.5 million tonnes, down 3 percent from competition in other markets like Brazil. the previous year’s record level. In response to a temporary slowdown in potash demand, Challenging application conditions in the US reduced several producers announced production curtailments potash demand by 1 million tonnes, while historically low which we estimate exceeded 3 million tonnes. New palm oil prices in Southeast Asia reduced potash demand projects in Canada and the Former Soviet Union (FSU) by nearly 2 million tonnes in 2019. While there was no continued to ramp up slowly, which contributed to a lower Chinese potash contract in 2019, Chinese shipments were global operating rate in 2019. strong in the first half of 2019. This led to an increase in K Market Outlook Improving potash market conditions with expected Shipments to Southeast Asian countries are expected shipment growth to most markets in 2020 . to increase from 2019 levels, supported by a significant We expect potash market fundamentals to improve as growers in key markets look to increase planting and replenish soil nutrients amid improved affordability. We expect potash shipments to most markets will increase in 2020, while production curtailments in 2019 help to lower improvement in palm oil prices and lower inventory. We expect positive consumption trends to continue in India, particularly with an improved monsoon season and the long-term agronomic need to balance fertilizer application rates. previously built-up inventories. Despite improved consumption trends in China and a We anticipate North American demand to rebound as planting acreage returns to recent historical levels and growers look to replenish soil nutrients following several shift to more potassium-intensive crops, we expect 2020 shipments will be limited by a drawdown of port inventories and a delayed contract settlement. missed application windows. In South America, elevated We expect global potash operating rates to increase in 2020 crop production and yields removed significant nutrients driven by a rebound in global demand and a slow-down in from the soil. As growers prepare for another strong season the pace of new project ramp-ups. We forecast global potash of planting, we believe potash demand will be strong as they shipments will be 66 to 68 million tonnes in 2020. look to maximize returns. US MidWest Potash Price US MidWest Potash Price ($/tonne) ($/tonne) $393 $393 $263 $263 $277 $277 $310 $310 $333 $333 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 Source: Fertilizer Week, Nutrien Source: Fertilizer Week, Nutrien 23% 23% $410 $410 10 Year 10 Year Average Average (2010-2019) (2010-2019) Global Potash Supply & Demand (Million Tonnes KCl) Range Demand Operational Capability 80 60 40 20 0 2 0 0 2 2 0 0 4 2 0 0 6 2 0 0 8 2 0 1 0 2 0 1 2 2 0 1 4 2 0 1 6 2 0 1 8 2 0 2 0 F 2 0 2 2 F 2 0 2 4 F Source: CRU, Fertecon, IFA, Nutrien 31 Nutrien Annual Report 2019Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Potash Financial Performance (millions of US dollars, except as otherwise noted) Manufactured product 1 Net sales North America Offshore Cost of goods sold Gross margin – manufactured Gross margin – other 2 Gross margin – total Impairment of assets Expenses 3 EBIT Depreciation and amortization EBITDA Adjusted EBITDA Dollars Tonnes (thousands) Average per Tonne 2019 2018 % Change 2019 2018 % Change 2019 2018 % Change 978 1,625 2,603 1,103 1,500 1 1,501 – 298 1,203 390 1,593 1,593 1,007 1,657 2,664 1,182 1,482 2 1,484 1,809 282 (607) 404 (203) 1,606 (3) (2) (2) (7) 1 (50) 1 (100) 6 n/m (3) n/m (1) 4,040 7,481 11,521 4,693 8,326 13,019 (14) (10) (12) Depreciation and amortization Gross margin excluding depreciation and amortization – manufactured Potash cash cost of product manufactured 242 217 226 96 130 34 164 63 214 199 205 91 114 31 145 60 13 9 10 5 14 10 13 5 1 Includes intersegment sales. See Note 3 to the financial statements. 2 Includes other potash and purchased products and is comprised of net sales of $1 million (2018 – $3 million) less cost of goods sold of $Nil (2018 – $1 million). 3 Includes provincial mining and other taxes of $287 million (2018 – $244 million). The most significant contributors to the changes in our Potash financial performance were as follows: 2019 vs 2018 Sales volumes Offshore volumes were lower due to a combination of lower demand in Southeast Asia due to lower palm oil prices in 2019 and a slowdown in demand in offshore markets in the fourth quarter as customers delayed purchases and drew down inventories. North American volumes were lower due to extreme weather in the US which impacted both the spring and fall application seasons. Net realized selling price Average selling prices increased in 2019 due to higher global benchmark prices in the first nine months of the year, which offset weaker prices in the fourth quarter resulting from a slowdown in demand in the second half of the year. Cost of goods sold per tonne Costs increased primarily due to lower production volumes resulting from the temporary production downtime at our Allan, Lanigan and Vanscoy potash mines, taken in response to the decrease in global potash demand, and from downtime at our Rocanville potash mine related to the Canadian National Railway strike. These impacts were partially offset by favorable foreign exchange impacts. Impairment of assets In 2018, we recorded a non-cash impairment of property, plant and equipment as a result of the decision to safely shut down our New Brunswick operations, which were no longer part of our medium or long-term strategic plans. See Note 15 to the financial statements. Provincial mining and other taxes We are subject to Saskatchewan provincial resource taxes, including the potash production tax and the resource surcharge. Expenses increased due to regulatory changes that raised taxes and from higher average potash selling prices, which are the basis for certain taxes. EBITDA EBITDA increased primarily due to the impairment of assets in 2018 noted above. Adjusted EBITDA in 2019 was similar to the prior year, as higher prices were offset by lower sales volumes and higher provincial mining taxes. 32 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Canpotex Sales by Market (percentage of sales volumes) Latin America Other Asian markets 1 China India Other markets 1 All Asian markets except China and India. Potash Production (million tonnes KCI) Rocanville Potash Allan Potash Vanscoy Potash Lanigan Potash Cory Potash Patience Lake Potash Total Shutdown weeks 3 K 2019 2018 % Change 31 27 22 10 10 33 31 18 10 8 (6) (13) 22 – 25 Operational Capability 2 Production 2020 2019 2019 2018 Nameplate Capacity 1 6.5 4.0 3.0 3.8 3.0 0.3 5.4 2.8 1.7 2.3 1.0 0.3 5.4 2.8 2.2 2.1 1.0 0.3 20.6 13.5 13.8 5.14 2.18 1.42 1.75 0.97 0.24 11.70 55 5.22 2.41 2.24 1.96 0.81 0.20 12.84 39 1 Represents estimates of capacity as at December 31, 2019. Estimates based on capacity as per design specifications or Canpotex entitlements once determined. In the case of Patience Lake, estimate reflects current operational capability. Estimates for all other facilities do not necessarily represent operational capability. 2 Estimated annual achievable production level at current staffing and operational readiness (estimated at beginning of year). Estimate does not include inventory-related shutdowns and unplanned downtime. 3 Represents weeks of full production shutdown, excluding the impact of any periods of reduced operating rates and planned routine annual maintenance shutdowns and announced workforce reductions. Nutrien Annual Report 2019 33 Nitrogen 2% NITROGEN EBITDA GROWTH IN 2019 +350,000mt ADDED AMMONIUM SULFATE CAPACITY IN 2019 91% AMMONIA OPERATING RATE IN 2019 (EXCLUDES TRINIDAD AND JOFFRE) 34 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other InformationOverview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Nitrogen Operating Environment N Our Business Nutrien has a total of 7.1 million mt of ammonia capacity from nine major facilities in North America and Trinidad with the ability to produce and sell more than 11 million tonnes of total finished nitrogen products. Our asset base is highly flexible, allowing us Approximately half of our nitrogen sales are to optimize product mix and profitability in agriculture-related and the remainder is sold for response to changing market conditions. industrial purposes. A portion of our industrial Our nitrogen plants in Canada and the US have access to low-cost natural gas and benefit from sales are linked to natural gas costs, reducing variability in margins. regional selling advantages. We also operate a We have equity investments in two world-scale large-scale nitrogen facility in Trinidad with gas nitrogen facilities located in Argentina and costs indexed primarily to ammonia prices, Egypt that contribute to our nitrogen earnings. providing margin stability. We produce all key nitrogen products and have flexibility to optimize product mix in response to changing market conditions. Our Strategy We are growing our nitrogen business and enhancing our competitive position through product and network optimization and strategic capacity expansion. Network optimization: safety of our operations and to decrease costs We are optimizing our nitrogen network to of turnarounds. Reliable and safe operations best leverage the production flexibility of our lower costs and improve utilization. We are also nine low-cost facilities and our extensive implementing a number of projects aimed to distribution network to capitalize on the reduce climate-related impact from production. benefits of our integrated model that includes our Retail business. Brownfield capacity expansion: We are increasing capacity through low-cost Operational excellence: and low-risk brownfield expansion and We are leveraging best practices in engineering debottleneck projects. and maintenance to improve the reliability and 35 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information 2019 Performance In 2019, we advanced several projects that will add a combined 350,000 mt of annual ammonia and urea capacity, increase efficiencies and reduce emissions. The cost of these projects is significantly lower than greenfield economics and are expected to be complete by the end of 2021. We continue to evaluate additional debottleneck opportunities and are also advancing engineering on two larger scale brownfield projects that could add 1.2 million tonnes of annual capacity at a cost of approximately $500 per tonne. In 2019, we captured approximately 1.2 million mt of CO2 equivalent and are aiming to increase this by over 15 percent in 2020. Nutrien Ammonia Production - 2019 (million tonnes) Urea Cash Cost & Price Comparison ($/tonne) Trinidad US W. Canada Feedstock Other Cost 8 6 4 2 0 2020 Gas Forecast US$/MMBtu1 $3.00 - $4.00 $2.00 - $3.00 $1.00 - $2.00 29% 37% 34% Ammonia Production Source: CRU, Fertecon, Argus, Nutrien 1 Gas price indicative range from Nutrien Trinidad, AECO and NYMEX 2020 YTD PNW Urea Price 2020 YTD NOLA Urea Price 400 400 300 300 200 200 100 100 0 0 W . C a n a d a 1 U S G ulf W . E ur. H u b W . E uro p ea n Trinid a d For m ula C hin a Bitu m in o us C hin a G as C hin a A nthracite U krain e Source: CRU, Fertecon, Argus, Nutrien 1 Western Canadian cash cost is shown as FOB. Competitive Landscape Production of nitrogen is the most geographically diverse of the three primary nutrients due to the widespread availability of hydrogen sources. Ammonia is primarily consumed close to the The US remains one of the largest importers of regions in which it is produced due to the nitrogen and a key driver of global trade despite high cost of transportation, whereas urea and a significant increase in domestic capacity and nitrogen solutions are more widely transported production over the past few years. and traded. We compete with other producers in Canada, the US and several offshore suppliers. 36 Nutrien Annual Report 2019 Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information N 2019 Market Conditions Weak global energy prices pressured nitrogen prices markets. A stable pricing environment combined with in 2019. Nitrogen prices were strong going into 2019, which incentivized high operating rates by marginal producers in Europe and China. At the same time, natural gas and coal prices began to decline in those regions which enhanced their competitiveness. Challenging weather in the US negatively impacted agricultural ammonia demand in 2019 while new marketable production capacity in the US, Russia and Indonesia added supply. This caused supply to temporarily declining feedstock costs led Chinese producers to increase production and exports. Coal prices continued to decline while the Chinese currency weakened, allowing operating rates to remain high despite a declining price environment. Although Chinese exports increased in 2019, they remain well below recent historical levels. Global UAN trade flows were disrupted by European Union anti-dumping duties on imports from the US, Russia and Trinidad. In addition, low European gas prices supported higher marginal production which pressured prices. outpace demand, leading to pricing pressure throughout most of 2019. Approximately 70 percent of our nitrogen production is located in North America where natural gas prices remained Global urea prices were relatively stable in the first half of 2019, supported by steady demand in most major subdued in 2019. In 2019, AECO benchmark gas prices were $1.22/MMBtu and US NYMEX gas prices were $2.63/MMBtu. Market Outlook Limited new capacity and robust demand in North on monsoon rains and may be influenced by any changes America is expected to tighten nitrogen supply and to the subsidy policy and maximum retail prices that demand in 2020. growers pay. We expect that limited global nitrogen capacity additions Outside of India, major nitrogen buyers have been and ongoing industry closures will help to tighten the purchasing hand-to-mouth due to the weak pricing nitrogen market and partially offset the impact of lower environment in the second half of 2019. We expect that energy prices. We expect North American nitrogen demand to be once the Northern Hemisphere’s spring season begins, it will support tightening in other markets as well. supported by an increase in corn planting and below- Overall, we project that global nitrogen demand will grow by normal fall ammonia application in 2019, caused by a two percent in 2020, supported by strength in North America compressed application window. We expect this to also and more normal growth in other major markets. We project result in higher in-season applications as growers maximize yields with affordable fertilizers. that global productive capacity will increase by less than one percent, driving higher operating rates in 2020. India is expected to maintain elevated import levels as it re-enters the market seasonally. Stability will depend US NOLA Urea Price ($/tonne) $317 $285 $270 $228 $228 27% $344 2015 2016 2017 2018 2019 10 Year Average (2010-2019) Global Nitrogen Supply & Demand (million tonnes nitrogen) Demand Operational Capability 180 120 60 0 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 E 2 0 2 0 F 2 0 2 1 F 2 0 2 2 F 2 0 2 3 F 2 0 2 4 F Source: Fertilizer Week, Nutrien Source: CRU, Nutrien 37 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Nitrogen Financial Performance Dollars Tonnes (thousands) Average per Tonne 2019 2018 1 % Change 2019 2018 1 % Change 2019 2018 1 % Change (millions of US dollars, except as otherwise noted) Manufactured product 2 Net sales Ammonia Urea Solutions, nitrates and sulfates Cost of goods sold Gross margin – manufactured Gross margin – other 2 Gross margin – total (Income) Expenses EBIT Depreciation and amortization 743 932 706 2,381 1,749 632 68 700 (4) 704 535 903 895 729 2,527 1,777 750 70 820 47 773 442 2,971 3,037 4,262 10,270 3,330 3,003 4,265 10,598 (11) 1 – (3) Depreciation and amortization Gross margin excluding depreciation 250 307 166 232 170 62 52 271 298 171 238 168 70 42 and amortization – manufactured 114 112 Ammonia controllable cash cost of product manufactured 45 43 (8) 3 (3) (3) 1 (11) 24 2 5 (18) 4 (3) (6) (2) (16) (3) (15) n/m (9) 21 2 EBITDA 1,239 1,215 1 Restated for the reclassification of sulfate from the Phosphate segment. See Note 3 to the financial statements. 2 Includes intersegment sales. See Note 3 to the financial statements. 3 Includes other nitrogen (including ESN® and Rainbow) and purchased products and is comprised of net sales of $467 million (2018 – $438 million) less cost of goods sold of $399 million (2018 – $368 million). The most significant contributors to the changes in our Nitrogen financial performance were as follows: 2019 vs 2018 Sales volumes Volumes were down slightly as adverse weather caused ammonia applications in North America to decline. Net realized selling price Our average selling price for nitrogen products was down slightly from the prior year primarily due to lower global benchmark prices. Our net realized selling price for urea increased slightly despite these market conditions due to the benefit of higher US inland premiums in the spring when supply was impacted by elevated water levels on many of the US river systems. Cost of goods sold per tonne Costs were slightly higher as a decrease in our overall gas cost was offset by a lower proportion of sales from our lower- cost facilities, increased maintenance costs and slightly lower operating rates. Expenses EBITDA Expenses decreased primarily due to higher earnings from our equity-accounted investees Misr Fertilizers Production Company S.A.E. in Egypt and Profertil S.A. in Argentina. EBITDA was higher primarily due to the impact of adopting IFRS 16 “Leases”, which caused a decrease in lease expenses and increases in depreciation and amortization, lower natural gas costs and higher earnings from our equity-accounted investees, more than offsetting lower sales volumes and net realized selling prices. Natural Gas Prices (US dollars per MMBtu, except as otherwise noted) Overall gas cost excluding realized derivative impact Realized derivative impact Overall gas cost Average NYMEX Average AECO 38 Nutrien Annual Report 2019 2019 2.47 0.11 2.58 2.63 1.22 2018 2.54 0.29 2.83 3.09 1.19 % Change (3) (62) (9) (15) 3 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Overall gas cost Gas costs were lower due to lower average NYMEX gas prices and lower derivative losses more than offsetting higher average AECO and contract gas prices. N 2019 vs 2018 Selected Nitrogen Measures Sales volumes (tonnes – thousands) Fertilizer Industrial and feed Net sales (millions of US dollars) Fertilizer Industrial and feed Net selling price per tonne Fertilizer Industrial and feed 2019 5,554 4,716 1,466 915 264 194 2018 5,680 4,918 1,444 1,083 254 220 Nitrogen Production (million tonnes product) Trinidad Nitrogen Redwater Nitrogen Augusta Nitrogen Lima Nitrogen Geismar Nitrogen Fort Saskatchewan Nitrogen Carseland Nitrogen Joffre Nitrogen Borger Nitrogen Total Ammonia operating rate 4 Ammonia 1 Production Urea 2 Production Annual Capacity 3 2019 2018 Annual Capacity 3 2019 2018 2.2 0.9 0.8 0.7 0.5 0.5 0.5 0.5 0.5 7.1 1.76 0.76 0.70 0.68 0.54 0.48 0.45 0.42 0.37 6.16 91 1.88 0.88 0.72 0.67 0.44 0.40 0.52 0.47 0.39 6.37 92 0.7 0.7 0.5 0.5 0.4 0.4 0.8 – 0.6 4.6 0.66 0.60 0.51 0.48 0.33 0.45 0.61 – 0.46 4.10 0.58 0.73 0.52 0.46 0.26 0.37 0.68 – 0.42 4.02 1 All figures are shown on a gross production basis. 2 Reflects capacity and production of urea liquor prior to final product upgrade. Urea liquor is used in the production of solid urea, UAN and DEF. 3 Annual capacity estimates include allowances for normal operating plant conditions. 4 Excludes Trinidad and Joffre. Nutrien Annual Report 2019 39 Phosphate 89% P205 OPERATING RATE (EXCLUDES REDWATER) $194M 2019 EBITDA $421 AVERAGE REALIZED NET SELLING PRICE PER TONNE IN 2019 Phosphate Operating Environment Our Business Nutrien has two integrated phosphate facilities in the US, both located near key fertilizer consuming markets and industrial customers. We are the second largest phosphate producer in North America and sell approximately 3 million tonnes of finished product. Due to the high quality of our phosphate rock, we are able to produce a diverse mix of phosphate products, including solid and liquid fertilizers, feed and industrial acids. Our Strategy We are focused on optimizing our phosphate business by increasing production at our Aurora, North Carolina and White Springs, Florida facilities after converting our Redwater, Alberta phosphate facility to an ammonium sulfate facility in 2019. We will continue to advance continuous improvement initiatives at our sites and evaluate opportunities to increase production of higher-margin product. 2019 Performance In 2019, we successfully converted our Redwater, Alberta facility to produce only ammonium sulfate – a milestone that eliminated, company-wide, our need to purchase phosphate rock. We restarted a second dry phosphate production line at White Springs, Florida, at the end of 2018 and began supplying the Western Canadian market with dry phosphate produced at our US facilities. 40 Nutrien Annual Report 2019Overview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other InformationOverview Managementʼs Discussion & Analysis Two Year Highlights Financial Statements Other Information Competitive Landscape Phosphate rock is found in significant quantity and quality in only a handful of geographic locations, and few with a progressive ethical and sustainability record. Many factors impact the viability of developing a We compete with producers primarily from rock deposit for mining. These include the quality China, Morocco, Russia, Saudi Arabia and the of the phosphate rock deposit, government US. For the production of finished phosphate stability, access to financing, environmental products (DAP, MAP), access to low cost requirements and proximity to target markets. ammonia and sulfur is also a consideration. Given the concentration of deposits in North Africa and the Middle East, government stability is a major consideration when evaluating potential phosphate project developments. Significant low-cost capacity has been commissioned over the past few years, including most notably in Morocco and Saudi Arabia. P 2019 Market Conditions Phosphate prices were under significant pressure The negative momentum in the second half of 2019 led throughout 2019 due to increased supply, including to the lowest ammonium phosphate prices in more than higher exports from China, and lower demand in the a decade. This gradual decline over an extended period US driven by weather factors and weak ammonia and of time led buyers to purchase on a just-in-time basis, sulfur input costs. New capacity continued to ramp up in Morocco and Saudi Arabia adding to global supply and lowering global operating rates. Meanwhile weak demand in China led to stronger- than-expected exports, particularly in the first half of the year. which further pressured global demand. By the end of 2019, production margins were at unsustainably low levels, which led to further production reductions and provided some support to prices entering 2020. Market Outlook Phosphate prices began to recover in early 2020 due to on production and exports from that key phosphate global production curtailments and improved demand producing region. India has drawn down its DAP prospects ahead of the spring season in the Northern inventories, which in combination with strong domestic Hemisphere. sales is expected to support import demand in 2020. Chinese production and exports will be a key driver in We expect that our phosphate business will continue 2020. Chinese production levels were already being to benefit from a diversified portfolio and that liquid pressured by poor economics, but the impact of the phosphate fertilizers and purified phosphoric acid will Coronavirus in Hubei province has had a negative impact continue to be more stable than solid phosphates. Global Phosphate Capability1 (2019) (percent share) Phosphate Sales Tonnes (million tonnes P205) Fertilizer Industrial Feed 36 China 15 Morocco 13 US 7 Russia 5 Saudi Arabia 24 Other 2.0 1.5 1.0 0.5 0.0 Source: Nutrien Source: CRU, Fertecon, IFA, Nutrien 1 Based on operational capability. 2018 2019 2020F 41 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Phosphate Financial Performance (millions of US dollars, except as otherwise noted) Manufactured product 2 Net sales Fertilizer Industrial and feed Cost of goods sold Gross margin – manufactured Gross margin – other 3 Gross margin – total Expenses EBIT Depreciation and amortization EBITDA Dollars Tonnes (thousands) Average per Tonne 2019 2018 1 % Change 2019 2018 1 % Change 2019 2018 1 % Change 2,130 759 2,889 2,425 847 3,272 (12) (10) (12) Depreciation and amortization Gross margin excluding depreciation and amortization – manufactured 371 561 421 422 (1) 82 81 410 500 434 406 28 59 87 (10) 12 (3) 4 n/m 39 (7) 790 426 1,216 1,218 (2) (3) (5) 38 (43) 237 194 995 424 1,419 1,329 90 (2) 88 26 62 193 255 (21) – (14) (8) n/m 50 n/m 46 n/m 23 (24) 1 Restated for the reclassification of Sulfate to the Nitrogen segment. See Note 3 to the financial statements. 2 Includes intersegment sales. See Note 3 to the financial statements. 3 Includes other phosphate and purchased products and is comprised of net sales of $152 million (2018 – $142 million) less cost of goods sold of $155 million (2018 – $144 million). The most significant contributors to the changes in our Phosphate financial performance were as follows: Sales volumes Net realized selling price Cost of goods sold per tonne EBITDA 2019 vs 2018 Volumes decreased due to adverse weather causing shortened spring and fall application seasons across North America in 2019. Our average realized phosphate prices were lower due to the impact of lower phosphate fertilizer prices globally and increased freight, transportation and distribution costs from shipping more product from our US facilities to Canada after the conversion of the Redwater facility. These factors more than offset the impact of higher realized industrial and feed prices. Costs increased due to lower sales volumes, and higher asset retirement obligation adjustments, which more than offset lower phosphate rock and raw material costs. EBITDA decreased as lower net realized selling prices, lower sales volumes and higher costs per tonne more than offset the impact of adopting IFRS 16 “Leases”, which caused a decrease in lease expenses and increases in depreciation and amortization. 42 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information P Phosphate Production (million tonnes) Aurora Phosphate White Springs Phosphate Total producing locations Redwater Phosphate 3 Total P2O5 operating rate 4 Phosphate Rock Phosphoric Acid (P2O5) Liquid Products Solid Fertilizer Products Production Production Production Production Annual Capacity 2019 2018 Annual Capacity 2019 2018 Annual Capacity 2019 2018 Annual Capacity 2019 2018 5.4 2.0 7.40 – 7.40 4.38 1.61 5.99 – 5.99 4.03 1.85 5.88 – 5.88 1.2 0.5 1.70 0.3 2.00 1.02 0.49 1.51 0.10 1.61 89 1.08 0.47 1.55 0.30 1.85 91 2.7 1 0.7 2 3.40 – 2.01 0.50 2.51 – 2.10 0.62 2.72 – 0.8 0.8 1.60 0.7 0.85 0.24 1.09 0.21 0.82 0.17 0.99 0.57 1 A substantial portion is consumed internally in the production of downstream products. The balance is exported to phosphate fertilizer producers or sold domestically to dealers who custom-mix liquid fertilizer. Capacity comprised of 2.0 million tonnes merchant grade acid and 0.7 million tonnes superphosphoric acid. 2 Represents annual superphosphoric acid capacity. A substantial portion is consumed internally in the production of downstream products. The balance is exported to phosphate fertilizer producers and sold domestically to dealers who custom-mix liquid fertilizer. 3 Phosphate operations at Redwater ceased in May 2019 and that facility is now used to produce ammonium sulfate for our Nitrogen operations. 4 Excludes Redwater. Comparative figures were restated to exclude Redwater. In addition to the production above, annual capacity (in millions of tonnes) for phosphate feed and purified acid was 0.7 and 0.3, respectively. 2019 production was 0.30 and 0.21, respectively, and 2018 production was 0.29 and 0.23, respectively. Nutrien Annual Report 2019 43 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Corporate and Others Financial Performance Effective January 1, 2019 we renamed the “Others” segment “Corporate and Others”. “Corporate and Others” is a non-operating segment comprising corporate and administrative functions that provide support and governance to our operating business units. Eliminations of sales between operating segments in 2019 were $(1,060) million (2018 – $(1,164) million) with gross margin of $5 million (2018 – $(35) million). Eliminations are not part of the Corporate and Others segment. Dollars (millions), except percentage amounts Sales Cost of goods sold Gross margin Selling expenses General and administrative expenses Provincial mining and other taxes Share-based compensation Impairment of assets Other expenses EBIT Depreciation and amortization EBITDA Finance costs Income tax expense (recovery) 2019 133 133 – (18) 264 2 104 120 171 (643) 42 (601) 554 316 2018 % Change 150 150 – (22) 284 2 116 – 106 (486) 54 (432) 538 (93) (11) (11) – (18) (7) – (10) n/m 61 32 (22) 39 3 n/m The most significant contributors to the changes in our Corporate and Others financial performance were as follows: 2019 vs 2018 Impairment of Assets In 2019 there were certain individually insignificant impairments of intangible assets and property, plant and equipment related primarily to changes to our future plans for those assets. Other Expenses Other expenses increased primarily due to a defined benefit plans curtailment gain recognized in 2018 (see Note 23 to the financial statements) with no comparative gain recognized in 2019 and higher acquisition and integration related costs from our recent acquisition. These were partially offset by lower Merger and related costs. There were no significant changes to finance costs as higher long-term interest costs from a higher long-term debt balance and impact of the adoption of IFRS 16 “Leases” were partially offset by lower short-term interest costs due to lower average commercial paper outstanding throughout the year. Finance Costs Weighted Average Debt Balances and Rates Dollars (millions), except percentage amounts Short-term balance 1 Short-term rate (%) 1 Long-term balance (excluding lease obligations) Long-term rate (excluding lease obligations) (%) Lease obligations balance Lease obligations rate (%) 2019 1,324 4.5 8,534 4.7 1,024 3.4 2018 2,933 3.3 8,175 4.8 25 3.7 1 North American weighted average short-term debt balances were $1,063 (2018 – $2,719) and rates were 2.4 percent (2018 – 2.5 percent). The decrease in the effective tax rates on earnings from continuing operations in 2019 compared to 2018 was a result of the 2018 impairment of property, plant and equipment in Canada. Income Tax Expense (Recovery) Effective Tax Rates and Discrete items Dollars (millions), except percentage amounts Actual effective tax rate on ordinary earnings (%) Actual effective tax rate including discrete items (%) Discrete tax adjustments that impacted the rate 2019 2018 24 24 (2) 72 75 4 44 Nutrien Annual Report 2019 Financial Overview 46 Guidance and Sensitivities 47 Financial Highlights 48 Financial Condition Review 49 Liquidity and Capital Resources 52 Capital Structure and Management 53 Off-Balance Sheet Arrangements 53 Other Financial Information 55 Quarterly Results 57 Enterprise Risk Management 61 Controls and Procedures 62 Forward-Looking Statements 63 Appendix – Non-IFRS Financial Measures Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information 2020 Guidance Dollars (billions) unless otherwise noted Adjusted net earnings per share (“Adjusted EPS”) 2 Adjusted EBITDA Retail EBITDA Potash EBITDA Nitrogen EBITDA Phosphate EBITDA (millions) Potash sales tonnes (millions) 3 Nitrogen sales tonnes (millions) 3 Depreciation and amortization Effective tax rate on continuing operations (%) Sustaining capital expenditures 1 See the “Forward-Looking Statements” section. 2 Assumes 574 million shares outstanding for all EPS guidance and sensitivities. 3 Manufactured product only. Nitrogen sales tonnes excludes ESN® and Rainbow products. 2020 Guidance Ranges 1 Low 1.90 3.8 1.4 1.3 1.2 180 12.3 11.0 1.80 23 1.0 High 2.60 4.3 1.5 1.5 1.4 250 12.7 11.6 1.90 25 1.1 2020 Sensitivities Price and Volume Sensitivities Dollars (millions), except EPS amounts Effect on Adjusted EPS Adjusted EBITDA Input Cost Sensitivities Dollars (millions), except EPS amounts Effect on Adjusted EPS Adjusted EBITDA NYMEX natural gas price changes by $1/MMBTu Canadian to US dollar changes by $0.02 Nitrogen ± 0.21 ± 165 Canadian operating expenses included in net earnings, excluding provincial taxes ± 0.02 ± 15 Price Potash changes by $20/tonne Ammonia changes by $20/tonne Urea changes by $20/tonne ± 0.25 ± 0.05 ± 0.09 ± 205 ± 40 ± 65 Volume Potash changes by 100,000 tonnes Nitrogen changes by 50,000 N tonnes Retail Crop nutrients changes by 1% 1 Crop protection changes by 1% 1 Seed changes by 1% 1 1 Gross margin as a percentage of sales. ± 0.01 ± 10 ± 0.02 ± 0.07 ± 0.08 ± 0.03 ± 15 ± 55 ± 60 ± 20 46 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Financial Highlights Dollars (millions) unless otherwise noted Nutrien 2019 Nutrien 2018 PCS 2017 Sales Net earnings (loss) from continuing operations Basic net earnings (loss) per share from continuing operations Diluted net earnings (loss) per share from continuing operations Net earnings Basic net earnings per share Diluted net earnings per share Total assets Total non-current financial liabilities Dividends declared per share 20,023 992 1.70 1.70 992 1.70 1.70 46,799 9,431 1.33 19,636 (31) (0.05) (0.05) 3,573 5.72 5.72 45,502 7,616 2.06 4,547 154 0.18 0.18 327 0.39 0.39 16,998 3,746 0.40 Sales Net earnings and earnings per share from continuing operations Net earnings and earnings per share Assets and non-current financial liabilities Nutrien 2019 vs Nutrien 2018 Nutrien 2018 vs PCS 2017 Sales increased primarily due to recent Retail acquisitions and higher potash realized prices driven by higher global benchmark pricing in the first half of the year, more than offsetting lower potash and nitrogen volumes. Sales increased primarily due to the addition of Agrium’s operations as a result of the Merger. Sales also increased due to Retail acquisitions, higher potash sales volumes and increases in potash, urea and phosphate fertilizer prices. We had earnings from continuing operations in 2019 compared to a loss from continuing operations in 2018, which was impacted by a non-cash impairment of property, plant and equipment in the Potash segment of $1,809 million. The repurchase of more than 36 million shares in 2019 positively impacted the 2019 per share amount. Net earnings and earnings per share were lower than 2018 primarily due to the 2018 gain on sale of our equity investments presented as discontinued operations offset by the 2018 non-cash impairment of property, plant and equipment in the Potash segment. The repurchase of more than 36 million shares in 2019 positively impacted the 2019 per share amount. We had a loss from continuing operations in 2018 compared to earnings in 2017 primarily due to a non-cash impairment of property, plant and equipment in the Potash segment of $1,809 million in 2018 more than offsetting the impact of the addition of Agrium’s operations and higher gross margin in all operating segments. Net earnings, and the related per share amounts, were higher in 2018 due to the gain on sale of our equity investments presented as discontinued operations, the addition of Agrium’s operations and higher gross margin in all operating segments more than offsetting the 2018 non-cash impairment of property, plant and equipment in the Potash segment. Assets increased primarily due to Retail acquisitions and the addition of right-of-use assets from adoption of IFRS 16 “Leases”, partially offset by a decrease in cash and cash equivalents. Assets and financial liabilities increased primarily due to the addition of Agrium’s assets and liabilities, including related purchase price allocation adjustments, acquired in the Merger. Non-current financial liabilities increased primarily due to additional lease liabilities recognized upon the adoption of IFRS 16 “Leases”, Retail acquisitions and the issuance of notes, partially offset by the repayment of notes. Other Comprehensive Income (Loss) There was other comprehensive income of $36 million in 2019 compared to a loss of $302 million in 2018 primarily related to translation of our Retail operations in Canada, Australia and Argentina to US dollars. The Canadian dollar strengthened relative to the US dollar in 2019, while in 2018, the Canadian dollar, Argentine peso and Australian dollar weakened relative to the US dollar. Nutrien Annual Report 2019 47 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Financial Condition Review Balance Sheet Analysis The most significant contributors to the changes in our balance sheet are analyzed below. Assets Liabilities For information regarding changes in cash and cash equivalents, refer to the “Sources and Uses of Cash” section on page 50 and the consolidated statements of cash flows in our financial statements. Receivables increased due to the recent Retail acquisition in Australia and a delayed fall application season in North America that pushed back sales and collection of receivables. Inventories increased due to the recent Retail acquisition in Australia, partially offset by lower inventory levels in North America in 2019. 2018 North American inventory purchases were higher than average in anticipation of increasing inventory prices. Prepaid expenses and other current assets increased due to accelerated seasonal Retail prepaid inventory purchases to take advantage of early payment discounts. Property, plant and equipment increased due to the addition of “right-of-use” assets of approximately $1 billion from the adoption of IFRS 16, “Leases”. Property, plant and equipment also increased due to recent Retail business acquisitions that closed in 2019. Goodwill and other intangible assets increased as a result of additional goodwill and intangible assets from the recent Retail acquisitions, primarily from Ruralco and Actagro. Short-term debt increased due to commercial paper issuances as part of our working capital management which was impacted by short-term softness in the global market. Long-term debt (including current portion) increased due to the addition of $1.5 billion in notes issued in April 2019 exceeding the repayment of $1 billion in notes that matured earlier in 2019. Lease liabilities (including current portion) increased due to the recognition of approximately $1 billion in lease liabilities from the adoption of IFRS 16 “Leases”. Payables and accrued charges increased as we had additional vendor prepayment arrangements, whereby we made financial commitments to vendors and financial institutions to prepay for inventory in return for product discounts. The recent acquisition in Australia also contributed to the increase. Deferred income tax liabilities increased due to the deferred tax provision recorded on higher earnings from continuing operations. Shareholders’ Equity Share capital decreased due to share repurchases. Retained earnings decreased due to the impact of share repurchases and dividends declared exceeding net earnings. We do not hold material cash and cash equivalents in currencies other than the US dollar, Canadian dollar and Australian dollar. We held approximately $159 million US dollar equivalent in Australia. We do not depend on repatriation of cash from our foreign subsidiaries to meet our liquidity and capital resources needs in North America. 48 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Liquidity and Capital Resources Sources and Uses of Liquidity Liquidity risk arises from our general funding needs and in the management of our assets, liabilities and capital structure. We manage liquidity risk to maintain sufficient liquid financial resources to fund our financial position and meet our commitments and obligations in a cost-effective manner. Our 2019 significant liquidity sources are listed below along with our expected ongoing primary uses of liquidity. Primary uses of liquidity (cid:129) operational expenses and prepayments (cid:129) seasonal working capital requirements (cid:129) sustaining and investing capital 2019 Included: (cid:129) business acquisitions (cid:129) dividends (cid:129) principal payments of debt securities (cid:129) share repurchases Primary sources of liquidity (cid:129) cash from operations (including customer prepayments) (cid:129) commercial paper issuances (cid:129) credit facility drawdowns (cid:129) debt capital markets (cid:129) inventory prepayment arrangements 2019 Highlights: (cid:129) Repurchased over 36 million common shares for cancellation at an aggregate cost of $1,878 million and increased our current normal course issuer bid (“NCIB”). At December 31, 2019 we had up to 12 million shares available to repurchase under the NCIB, which expires on February 26, 2020. As of February 19, 2020, an additional 2,214,780 common shares were repurchased at a cost of $95 million. See Note 25 to the financial statements. (cid:129) Repaid at maturity $1 billion of notes in the first half of 2019. See Note 20 to the financial statements. (cid:129) Issued $1.5 billion in notes consisting of $750 million in 4.2% notes due April 1, 2029 and $750 million in 5.0% notes due April 1, 2049. See Note 20 to the financial statements. (cid:129) Increased commercial paper outstanding from $391 million to $650 million. (cid:129) Acquired Ruralco, an agriservices business in Australia with approximately 250 Retail operating locations. In addition, we acquired 68 other Retail locations globally, which included Actagro, Van Horn, Inc. and Security Seed and Chemical, Inc. in the US as well as completing the remainder of the Agrichem acquisition in Brazil. See Note 4 to the financial statements. Cash used to acquire Retail locations totaled $911 million. (cid:129) Paid over $1 billion in dividends to shareholders. We increased our expected quarterly dividend from $0.43 per share to $0.45 per share commencing for dividends declared in the third quarter of 2019. Nutrien Annual Report 2019 49 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information We believe that internally generated cash flow, supplemented by available borrowings under our existing financing sources, if necessary, will be sufficient to meet our anticipated capital expenditures and other cash requirements for at least the next 12 months. We do not reasonably expect any presently known trend or uncertainty to affect our ability to access our historical sources of liquidity. We had positive working capital of $1.55 billion and a working capital ratio of 1.2 at December 31, 2019 and an adjusted net debt to adjusted EBITDA ratio of 2.5. Sources and Uses of Cash Our cash flows from operating, investing and financing activities are summarized in the following table: (millions of US dollars, except as otherwise noted) Cash provided by operating activities Cash (used in) provided by investing activities Cash used in financing activities Effect of exchange rate changes on cash and cash equivalents (Decrease) increase in cash and cash equivalents 2019 2018 % Change 3,665 (2,798) (2,479) (31) 2,052 3,887 (3,705) (36) (1,643) 2,198 79 n/m (33) (14) n/m Cash and cash equivalents decreased by $1,643 million in 2019 compared to an increase of $2,198 million in 2018, due to: (cid:129) Decrease of approximately $5.8 billion in cash receipts related to the 2018 sale of SQM and APC equity investments and cash acquired as a result of the Merger in 2018. (cid:129) Increase in our acquisitions and capital expenditures by approximately $900 million as we continue to grow our Retail business and invest in technology and long-term assets. (cid:129) These decreases were partially offset by an increase from our financing activities as we borrowed an incremental $500 million in long-term debt and reduced our short-term debt repayments. In addition, cash provided by operations was $3,665 million, an increase of $1,613 million over 2018. Our payables and accrued charges increased as a result of deferring payments related to our inventory prepayment arrangements. 50 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Cash Requirements The following aggregated information about our contractual obligations and other commitments summarizes our liquidity and capital resource requirements as at December 31, 2019. The information presented in the table below does not include planned (but not legally committed) cash requirements. Planned or anticipated cash requirements that may not yet be fully included in the table below include annual investments in sustaining capital, share repurchases, dividends, acquisition of Retail and other businesses, investments in technology such as our Retail digital platform, investments in our Next Generation Potash program and potential investments in brownfield projects in Nitrogen and Phosphate. We do not currently have any significant projects in process that have not generated revenue. Dollars (millions) at December 31, 2019 Long-term debt obligations Estimated interest payments on long-term debt obligations Lease liabilities Estimated interest payments on lease liabilities Purchase commitments Capital commitments Other commitments Asset retirement obligations and environmental costs 1 Other long-term liabilities 2 Payments Due by Period Financial Statement Note Reference Note 20, 27 Note 27 Note 21, 27 Note 27 Note 27 Note 27 Note 27 Note 24 Note 9, 12, 23 Total 8,704 5,688 1,122 180 2,290 50 437 3,002 3,688 Within 1 Year 508 386 217 32 877 43 118 206 101 1 to 3 Years 521 3 to 5 Years 1,250 747 318 46 766 7 137 301 114 673 204 30 438 – 58 334 116 Over 5 Years 6,425 3,882 383 72 209 – 124 2,161 3,357 Total 25,161 2,488 2,957 3,103 16,613 1 Commitments associated with our asset retirement obligations are the estimated cash outflows and are expected to occur over the next 485 years for phosphate (with the majority taking place over the next 80 years) and between 40 and 440 years for Potash. Potash cash flows are estimated for the first year of decommissioning for operating sites and for all years for permanently shut down sites. Environmental costs consist of restoration obligations, which are expected to occur through 2050. 2 Other long-term liabilities consist primarily of pension and other post-retirement benefits, derivative instruments, income taxes and deferred income taxes. Deferred income tax liabilities may vary according to changes in tax laws, tax rates and our operating results. Since it is impractical to determine whether there will be a cash impact in any particular year, all deferred income tax liabilities have been reflected as other long-term liabilities in the Over 5 Years category. Nutrien Annual Report 2019 51 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Capital Structure and Management We manage our capital structure with a focus on maintaining a strong balance sheet, enabling a strong investment-grade credit rating. Principal Debt Instruments We use a combination of cash generated from operations and short-term and long-term debt to finance our operations. We have the following short-term debt instruments available: The credit facilities consist of a $4,500 million unsecured North American revolving term credit facility, a $500 million North American uncommitted revolving demand facility and approximately $820 million of other credit facilities in the US, Europe, Australia and South America. Included in the amount outstanding and committed is $650 million of commercial paper and $326 million of other short-term debt. We have a $4,500 million credit limit under our commercial paper program, which is limited to the availability of backup funds backstopped by the $4,500 million unsecured revolving term credit facility. Interest rates on outstanding commercial paper ranged from 2.0 to 2.1 percent. Our long-term debt consists primarily of notes and debentures with the following maturities and interest rates: We also have lease obligations totaling $1,073 million (including current portion) with a weighted average effective interest rate of 3 percent as at December 31, 2019. 52 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the London Interbank Offered Rate (“LIBOR”) by the end of 2021. We are in the process of identifying and updating existing contracts extending past 2021 that reference LIBOR, and we expect no material impact to our financial statements as a result of the transition. Debt Covenants Our credit facilities have financial tests and other covenants with which we must comply at each quarter-end. Non-compliance with any such covenants could result in accelerated payment of amounts borrowed and termination of lenders’ further funding obligations under the credit facilities. We were in compliance with all such covenants as at December 31, 2019. Debt-to-capital ratio 1 At December 31 0.33 0.65 Limit 2019 1 This debt covenant is a non-IFRS financial measure and is calculated as the sum of short-term debt, long-term debt (including current portion), lease obligations and financial letters of credit divided by the sum of those amounts, non-controlling interests and shareholders’ equity. The ratio of our short-term debt and long-term debt (including current portion) to our short-term debt, long-term debt (including current portion) and shareholders’ equity, which is the nearest comparable IFRS measure, is 0.33. The accompanying table summarizes the limits and results of certain covenants. Credit Ratings Our ability to access reasonably priced debt in the capital markets depends, in part, on the quality of our credit ratings. We continue to maintain investment-grade credit ratings for our long-term debt. A downgrade of the credit rating of our long-term debt could increase the interest rates applicable to borrowings under our credit facilities. Commercial paper markets are normally a source of same-day cash for us. Our access to the US commercial paper market primarily depends on maintaining our current short-term credit ratings as well as general conditions in the money markets. As at December 31, Moody’s S&P Long-term Debt Rating (Outlook) Short-Term Debt Rating 2019 2018 Baa2 (stable) BBB (stable) Baa2 (stable) BBB (stable) 2019 P-2 A-2 2018 P-2 A-2 A security rating is not a recommendation to buy, sell or hold securities. Such ratings may be subject to revision or withdrawal at any time by the respective credit rating agency and each rating should be evaluated independently of any other rating. Outstanding Share Data Common shares Options to purchase common shares February 19, 2020 570,736,961 9,163,502 For more information on our capital structure and management, see Note 26 to the financial statements. For more information on our short-term debt and long-term debt, see Note 19 and Note 20 to the financial statements. Off-Balance Sheet Arrangements Principal off-balance sheet activities primarily include: (cid:129) Certain non-financial derivatives that were entered into and (cid:129) Agreement to reimburse losses of Canpotex (see Note 30 to the financial statements). (cid:129) Issuance of guarantee contracts (see Note 28 to the financial statements). continued to be held for the purpose of the receipt or delivery of a non-financial item in accordance with expected purchase, sale or usage requirements. Other derivatives are included on our balance sheet at fair value. We do not reasonably expect any presently known trend or uncertainty to affect our ability to continue using these arrangements. Other Financial Information Related Party Transactions Our most significant related party is Canpotex, which provides us with low-cost marketing and logistics for the offshore potash markets that we serve. Refer to Note 29 to the financial statements for information on our related party transactions. Nutrien Annual Report 2019 53 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Market Risks Associated With Financial Instruments Market risk is the potential for loss from adverse changes in the market value of financial instruments. The level of market risk to which we are exposed varies depending on the composition of our derivative instrument portfolio, as well as current and expected market conditions. See Note 12 to the financial statements for information on our financial instruments’ risks and risk management. Critical Accounting Estimates We prepare our financial statements in accordance with IFRS, which requires us to make judgments, assumptions and estimates in applying accounting policies. Critical accounting estimates are those which are highly uncertain at the time they are made or where different estimates would be reasonably likely to have a material impact on our financial condition or results of operations. We have discussed the development, selection and application of our key accounting policies, and the critical accounting estimates and assumptions they involve, with the audit committee of the Board. Critical Accounting Estimate Business combinations – measurement of assets acquired, and liabilities assumed Goodwill impairment Financial Statement Reference 1 Note 4 Description Significant judgment for our business combinations included identifying assets acquired and liabilities assumed, and estimation of their fair values. Key assumptions used in estimation of fair value include discount rates and revenue growth rates specific to the acquired assets or liabilities assumed. All segments are impacted as all assets acquired, and liabilities assumed, from Agrium in the Merger were required to be measured at fair value. In 2019, all of the significant business combinations were in the Retail segment. Note 16 and Note 31 Operating segments other than Phosphate have goodwill allocated to them that must be assessed for impairment when events or circumstances indicate there could be an impairment, or at least annually. Based on our assumptions at the time of our goodwill impairment testing, the excess of the recoverable value of the Retail – North America group of cash-generating units (“CGUs”) over the book value is 6 percent. Key assumptions in our testing models may change, and changes that could reasonably be expected to occur may cause impairment. The sensitivity of Retail – North America’s recoverable amount, in millions of US dollars, to changes in key assumptions is as follows: Key Assumptions Discount rate Terminal growth rate Forecasted EBITDA over forecast period Percentage Point Change Change in Recoverable Amount +0.1 -0.1 +0.1 -0.1 +5.0 -5.0 (330) 350 290 (280) 960 (960) At December 31, 2019, we reviewed our Phosphate CGUs for impairment triggers. For our Aurora CGU, we used judgment in assessing possible indicators of impairment including expected mine life, supply and demand variables and expected benchmark prices. Based on our assessment, there were no impairment triggers. For our White Springs CGU, we identified an impairment trigger due to deteriorating price expectations and the expected remaining mine life. We completed an impairment analysis and determined that there was no impairment in excess of the $250 million impairment loss previously recorded at December 31, 2017. The following table highlights for White Springs CGU, sensitivities to the recoverable amount in millions of US dollars which could result in additional impairment losses or reversals of previously recorded losses: Key Assumptions Sales prices Forecasted EBITDA over forecast period Discount rate Percentage Point Change Change in Recoverable Amount ±1.0 ±5.0 ±0.5 ±20 ±20 ±10 Significant estimates for the measurement of our income taxes include assessing the probability and measurement of our uncertain tax provisions related to complex global tax regulations, estimating forecasted taxable income and the timing of reversal of temporary differences, and assessing the probability of future taxable income used to recognize deferred tax assets. Although we believe our assumptions and estimates are reasonable, our tax assets are realizable and our accruals for tax liabilities are adequate for all open tax years based on our interpretation of tax laws and prior experience, actual results could differ. Changes in the income tax legislations, regulations and interpretations may result in a material impact to our financial statements. Income taxes are recorded in our Corporate and Others segment. Long-lived asset impairment Note 15 and Note 31 Income taxes – measurement Note 9 and Note 30 54 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Financial Statement Reference 1 Note 24 Critical Accounting Estimate Asset retirement obligations (“AROs”) and accrued environmental costs – measurement (“ERLs”) The Potash and Phosphate segments have these liabilities (which have a high degree of estimation uncertainty for future costs and estimated timelines) associated with their mining operations while the Corporate and Others segment has AROs and ERLs associated with non-operational mines. Description 1 Included in the notes are a description of the estimate and the methodology for calculating (when applicable) key areas of judgment related to the estimate and changes to the estimate (if any). Recent Accounting Changes We adopted IFRS 16 “Leases” as of January 1, 2019. For details on all significant accounting standards changes refer to Note 31 to the financial statements. Quarterly Results (millions of US dollars, except as otherwise noted) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 2019 2018 Sales Net (loss) earnings from continuing operations Net earnings from discontinued operations Net (loss) earnings EBITDA Earnings (loss) per share (“EPS”) from continuing operations Basic Diluted EPS Basic Diluted 3,442 (48) – (48) 499 (0.08) (0.08) (0.08) (0.08) 4,169 141 – 141 785 0.25 0.24 0.25 0.24 8,693 858 – 858 1,781 1.48 1.47 1.48 1.47 3,719 41 – 41 596 0.07 0.07 0.07 0.07 3,762 296 2,906 3,202 944 4,034 (1,067) 23 (1,044) (932) 8,145 3,695 (1) – (1) 487 741 675 1,416 1,507 0.48 0.48 5.23 5.22 (1.74) (1.74) (1.70) (1.70) 1.18 1.17 2.25 2.24 – – – – The agricultural products business is seasonal. Crop input sales are primarily concentrated in the spring and fall application seasons. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete, while customer prepayments made to us are typically concentrated in December and January, and our inventory prepayments paid to our vendors are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year. Beginning on January 1, 2018, earnings were impacted by the operations of Agrium acquired in the Merger. In the second and fourth quarters of 2018, earnings were impacted by $0.6 billion and $2.9 billion, respectively, in after-tax gains on the sales of our investments in SQM and APC, which were categorized as discontinued operations. In the third quarter of 2018, earnings were impacted by a $1.8 billion non-cash impairment to property, plant and equipment in the Potash segment. Fourth Quarter Financial Performance (millions of US dollars) Three months ended December 31 Retail Crop nutrients Crop protection products Seed Merchandise 1 Services and other Total 1 2019 907 635 99 211 319 Sales 2018 917 644 103 142 211 2,171 2,017 % Change 2019 2018 % Change Gross Margin (1) (1) (4) 49 51 8 186 281 60 44 165 736 184 270 56 27 125 662 1 4 7 63 32 11 1 Certain immaterial figures have been reclassified or grouped together for the three months ended December 31, 2018. Nutrien Annual Report 2019 55 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information (millions of US dollars) Manufactured Product Sales Tonnes (thousands) Manufactured Product Average Net Price per MT Three months ended December 31 2019 2018 % Change 2019 2018 % Change Potash North America Offshore Sales Cost of goods sold Gross margin Nitrogen Ammonia Urea Solutions, nitrates and sulfates Sales Cost of goods sold Gross margin Phosphate Fertilizer Industrial and feed Sales Cost of goods sold Gross margin 651 1,234 1,885 571 695 1,096 2,362 466 181 647 731 2,126 2,857 808 687 1,016 2,511 601 207 808 (11) (42) (34) (29) 1 8 (6) (22) (13) (20) 226 164 186 112 74 245 278 152 212 171 41 334 581 403 395 8 242 216 223 95 128 290 337 177 257 175 82 423 513 446 428 18 (7) (24) (17) 18 (42) (16) (18) (14) (18) (2) (50) (21) 13 (10) (8) (56) Highlights of our 2019 fourth quarter compared to the 2018 fourth quarter results were as follows: Retail Potash Nitrogen Phosphate Q4 2019 vs Q4 2018 Gross margin increased primarily due to higher merchandise sales, application services sales and livestock exports from the recently acquired Ruralco in Australia. Gross margin decreased primarily due to lower offshore demand as customers in key markets drew down existing inventory. The temporary production downtime in response to lower demand and the Canadian National Railway labour strike led to higher costs of goods sold per tonne. This temporary slowdown in global demand caused lower benchmark prices and a lower net realized selling price per tonne. Our offshore net realized selling price per tonne was also negatively impacted by adjustments to our provisional selling price to Canpotex. Gross margin decreased primarily due to a lower net realized selling price caused by declines in global benchmark prices and from lower ammonia sales volumes caused by unfavorable weather in North America. Gross margin decreased primarily due to a reduced net realized selling price as higher prices for industrial products were more than offset by lower dry fertilizer prices aligned with lower benchmark prices. This was partially offset by a decrease in cost of goods sold per tonne resulting from lower raw materials costs and positive asset retirement obligation adjustments from changes to cost estimates. Selling costs in Retail increased due to higher sales related to acquired businesses. Impairment of assets increased due to certain individually insignificant impairments of intangible assets and property, plant and equipment related primarily to changes to our future plans for those assets. Other fourth quarter financial highlights We had an income tax recovery in the fourth quarter of 2019 due to the loss from continuing operations and income tax expense in the fourth quarter of 2018 due to the earnings from continuing operations. The effective tax rate increased as a result of a change in proportionate earnings between jurisdictions. Net earnings from discontinued operations were higher in the fourth quarter of 2018 primarily due to gains on the sale of our equity investments in SQM and APC (net of tax). There was other comprehensive income in the fourth quarter of 2019 compared to an other comprehensive loss in the fourth quarter of 2018 primarily due to a gain on translation of our Retail operations in Canada and Australia in 2019 compared to losses in 2018. 56 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Enterprise Risk Management Nutrien integrates enterprise risk management into all of our strategic and business activities. We focus on managing risks and facilitating informed risk taking to remain competitive in an increasingly volatile and uncertain global economy. Risk Strategy and Governance Our strategic and risk management processes are integrated to ensure we understand and benefit from the relationship between strategy, risk and value creation. By considering risk throughout our business, we seek to align our strategy with our vision and effectively manage the embedded business risks that could impact the achievement of our strategy. Our approach to risk management is governed by our Board of Directors, including our Board committees, which oversee our Executive Leadership Team. By understanding the principal risks to our business and strategy and implementing measures to manage those risks, we seek an appropriate balance between risk and return. Key Risks We characterize a Key Risk as a risk or combination of risks that could negatively impact the achievement of our vision and ability to deliver on our strategy. We evaluate those risks we believe could have a significant negative effect on safety, health and environment, the Company’s financial results, or our reputation, while also considering mitigation efforts. We consider the following to be Key Risks at this time. For a more detailed discussion of our risks, refer to Nutrien’s 2019 Annual Information Form. 1 Agriculture Changes and Trends Associated Key Priorities Description The following factors, in addition to other factors, could impact our strategy, demand for our products and/or financial performance: farm and industry consolidation, shifting grower demographics, agriculture productivity and development, climate change, changes in consumer food preferences, governments and climate change initiatives, and technological innovation and digital business models. Risk Management Approach Our integrated business platform and diversified earnings portfolio (consisting of crop inputs and services) are designed to respond and adapt to changes in agriculture. We are proactive in developing and using new agricultural products and practices including our integrated digital platform. Our teams have strong industry knowledge and direct customer relationships across the value chain, providing unique insights on trends and developments in the agriculture industry. Sustainability Growth & Capital Allocation Innovation & Technology Employees Nutrien Annual Report 2019 57 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Enterprise Risk Management Continued 2 Shifting Market Fundamentals Associated Key Priorities Description Changes in global macroeconomic conditions – including trade tariffs and/or other trade restrictions, increased price competition or a significant change in agriculture production or consumption trends – could lead to a low crop price environment and reduced demand for our products or increased prices or decreased availability of raw materials used in making our products. Risk Management Approach Our diversified business model and portfolio of agricultural products, services and solutions, combined with our global presence, is designed to enable us to respond to changing economic conditions. We have a favorable cost-to-service position and the flexibility to make operational changes across our portfolio in order to minimize the impact of changing market dynamics. We also engage in market development, education, training and customer relations initiatives that support growth. 3 Changing Regulations Associated Key Priorities Description Changing laws, regulations and government policies – including health and safety, environmental and climate change – could affect our ability to produce or sell certain products, reduce our efficiency and competitive advantage, increase our costs of raw material, energy, transportation or compliance, or require us to make capital improvements to our operations – all of which could impact our financial performance or reputation. Risk Management Approach We have a Government & Industry Affairs team and an active engagement strategy with governments and regulators that keeps us current on regulatory developments affecting our business. We are active in industry associations that address proposed changes to laws and regulations impacting our industry. We have a sustainability strategy and we are developing a climate change strategy to assist in managing the impact of potential regulatory changes. 4 Political, Economic and Social Instability Associated Key Priorities Description Political, economic and social instability may affect our business including, for instance, if any of the jurisdictions in which we operate introduce restrictions on monetary distributions, forced divestitures or changes to or nullification of existing agreements, mining permits or leases. Instability in political or regulatory regimes could also affect our ability to do business and could impact our sales and operating results, our reputation or the value of our assets. Risk Management Approach We have a Government & Industry Affairs team and an active engagement strategy with governments, regulators and other stakeholders in the countries where we operate or plan to operate. We assess capital investments and project decisions against political, country and other related risk factors. Dedicated teams regularly monitor developments and global trends that may impact us. Sustainability Growth & Capital Allocation Innovation & Technology Employees 58 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Enterprise Risk Management Continued 5 Cybersecurity Threats Associated Key Priorities Description Cyberattacks or breaches of our systems, including our digital platform or exposure to potential computer viruses, could lead to disruptions to our operations, loss of data, or the unintended disclosure of confidential information or property damage. Any of these could result in business disruptions, reputational damage, personal injury, or third- party claims, impacting our operations, financial performance or reputation. Risk Management Approach We maintain an enhanced focus on cybersecurity in conjunction with our cybersecurity strategy, policy and framework. Threat and risk assessments are completed for all new information technology systems, and our cybersecurity incident response processes are backstopped by external response measures. 6 Stakeholder Support Associated Key Priorities Description Our stakeholders may not support our business plans or structure, strategy or core sustainability and social responsibilities. Loss of stakeholder confidence impairs our ability to execute our business plans, negatively impacts our ability to produce or sell our products and may lead to reputational and financial losses or shareholder action. Risk Management Approach We proactively and regularly engage with our stakeholders to identify and address their concerns and communicate the long-term value opportunities associated with our business plans. We have a sustainability strategy that is structured to support what matters most to our stakeholders and are in the process of developing a climate strategy. See page 14 of this report for more information on sustainability strategy. 7 Talent and Organizational Structure Associated Key Priorities Description An inability to attract, develop or retain skilled employees, or establish the right organizational structure or culture, could impact productivity, reliability, safety performance, costs or our reputation. Risk Management Approach We strategically map critical talent in anticipation of future needs, seeking to hire talent with the right fit for our culture and purpose. Our succession planning proactively identifies critical roles and links to internal top talent. Our incentive programs are competitive and support our purpose-driven culture with performance expectations encouraging inclusion and diversity. See page 20 of this report for Nutrien’s people strategy. Sustainability Growth & Capital Allocation Innovation & Technology Employees Nutrien Annual Report 2019 59 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Enterprise Risk Management Continued 8 Retail Business Model Associated Key Priorities Description Digital innovations, increased research and development activity and new technologies in the agriculture industry, among other factors, could alter the competitive environment, impacting our Retail operations and financial performance. Risk Management Approach Our full-service offering, continued investment in technology, and integrated digital platform position our Retail business as a leader in agricultural solutions for growers. We are actively involved in the ag technology innovation space through external investments and partnerships. We seek to maintain strong relationships with industry partners, positioning Nutrien Ag Solutions as a key part of the ag value chain for both suppliers and growers. Our dedicated in-house product innovation teams continue to invest in enhancing our digital platform and e-commerce capabilities through focused research and development and acquisitions. See page 18 of this report for more information on innovation & technology at Nutrien. 9 Capital Allocation Associated Key Priorities Description Our inability to deploy capital or to effectively execute on opportunities – whether due to market conditions, lack of options or otherwise, or deploying capital in a manner inconsistent with our strategic priorities – could impact our returns, operations, reputation or access to capital. Risk Management Approach We are focused on creating long-term value and on allocating capital consistent with our strategic priorities and capital allocation strategy. We employ a governance process for all capital allocation decisions and incorporate risk- related factors, including execution risk, in those decisions. See page 16 of this report for our capital allocation strategy. 10 Safety, Health & Environment Associated Key Priorities Description Our operations are subject to safety, health and environmental risks inherent in the mining, manufacturing, transportation, storage and distribution of our products. These factors could result in injuries or fatalities, or impact the biodiversity, water resources or related ecosystems near our operations, impacting our operations, financial performance or reputation. Risk Management Approach We have robust governance processes that ensure we follow all regulatory, industry and internal standards of safety, health and environmental responsibility. We have structured incident prevention and response systems in place, conduct regular security vulnerability assessments and maintain protocols for employees working and traveling abroad. We have developed crisis communication protocols and emergency response programs and personnel can be deployed in the event of a significant incident. We maintain environmental monitoring and control systems, including third-party reviews of key containment structures. Sustainability Growth & Capital Allocation Innovation & Technology Employees 60 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Controls and Procedures Disclosure Controls and Procedures We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by Nutrien in its annual filings, interim filings (as these terms are defined in National Instrument 52-109 – Certification of Disclosure in Issuers Annual and Interim Filings (NI 52-109)) and other reports filed or submitted by us under securities legislation is recorded, processed, summarized and reported within the required time periods. Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures as of the end of the period covered by the annual filings, being December 31, 2019, have concluded that, as of such date, our disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed by Nutrien in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is (a) recorded, processed, summarized and reported within the time periods specified in the securities legislation, and (b) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, and NI 52-109. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with IFRS. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the design and effectiveness of our internal control over financial reporting as of the end of the fiscal year covered by this report based on the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). There was no change in our internal control over financial reporting in 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as at December 31, 2019, Nutrien Ltd. did maintain effective internal control over financial reporting. We completed the Ruralco acquisition on September 30, 2019 as more fully described in Note 4 to the Financial Statements. This business was excluded from management’s evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 due to the proximity of the acquisition to year-end. The associated total assets represent 2 percent of consolidated assets and total revenues represent 1 percent of consolidated revenues included in our 2019 financial statements. The effectiveness of the Company’s internal control over financial reporting as at December 31, 2019 was audited by KPMG LLP, as reflected in their report, which is included in this 2019 Annual Report. Nutrien Annual Report 2019 61 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Forward-Looking Statements Certain statements and other information included in this document, including within the “2020 Guidance” section, constitute “forward-looking information” or “forward-looking statements” (collectively, “forward-looking statements”) under applicable securities laws (such statements are often accompanied by words such as “anticipate”, “forecast”, “expect”, “believe”, “may”, “will”, “should”, “estimate”, “intend” or other similar words). All statements in this document, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to: Nutrien’s 2020 annual guidance, including our growth and capital allocation strategies and expectations regarding our adjusted net earnings per share, adjusted EBITDA and EBITDA by segment; expectations regarding our sustainability, environmental (including climate), D&I and innovation and technology initiatives; capital spending expectations for 2020; expectations regarding performance of our operating segments in 2020; our operating segment market outlooks and market conditions for 2020, and including anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, crop mix, prices and the impact of currency fluctuations and import and export volumes; expectations regarding repurchases of our Common Shares, including the timing thereof; expectations regarding completion of previously announced expansion projects (including timing and volumes of production associated therewith); and acquisitions and divestitures (including expected timing of closing thereof), and the expected synergies associated with various acquisitions, including timing thereof. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements. All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although we believe that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The additional key assumptions that have been made include, among other things, assumptions with respect to our ability to successfully complete, integrate and realize the anticipated benefits of our already completed and future acquisitions, and that we will be able to implement our standards, controls, procedures and policies at any acquired businesses to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by us, including with respect to prices, margins, demand, supply, product availability, supplier agreements, availability and cost of labor and interest, exchange and effective tax rates; the completion of our expansion projects on schedule, as planned and on budget; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2020 and in the future (including as outlined in the 2020 Outlook section); the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to identify suitable candidates for acquisitions and divestitures and negotiate acceptable terms; our ability to maintain investment grade ratings and achieve our performance targets; and the receipt, on time, of all necessary permits, utilities and project approvals with respect to our expansion projects and that we will have the resources necessary to meet the projects’ approach. Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general global economic, market and business conditions; failure to complete announced and future acquisitions or divestitures at all or on the expected terms and within the expected timeline; climate change and weather conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy (including tariffs, trade restrictions and climate change initiatives), government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof; political risks, including civil unrest, actions by armed groups or conflict and malicious acts including terrorism; the occurrence of a major environmental or safety incident; innovation and cybersecurity risks related to our systems; regional natural gas supply restrictions; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; gas supply interruptions; any significant impairment of the carrying value of certain assets; risks related to reputational loss; certain complications that may arise in our mining processes; the ability to attract, engage and retain skilled employees and strikes or other forms of work stoppages; and other risk factors detailed from time to time in Nutrien reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States. The purpose of our expected adjusted net earnings per share, adjusted EBITDA and EBITDA by segment guidance ranges, as well as our adjusted earnings per share and adjusted EBITDA price and volume and input cost sensitivities ranges, are to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes. Nutrien disclaims any intention or obligation to update or revise any forward-looking statements in this document as a result of new information or future events, except as may be required under applicable Canadian securities legislation or applicable US federal securities laws. 62 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Appendix Non-IFRS Financial Measures We use both IFRS and certain non-IFRS financial measures to assess performance. Non-IFRS financial measures are numerical measures of a company’s performance, that either exclude or include amounts that are not normally excluded or included in the most directly comparable measures calculated and presented in accordance with IFRS. In evaluating these measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts. Management believes the non-IFRS financial measures provide transparent and useful supplemental information to help investors evaluate our financial performance, financial condition and liquidity using the same measures as management. These non-IFRS financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS. The following section outlines our non-IFRS financial measures, their definitions, and why management uses each measure. It includes reconciliations to the most directly comparable IFRS measures. EBITDA, Adjusted EBITDA and Potash Adjusted EBITDA Most directly comparable IFRS financial measure: Net earnings (loss) from continuing operations. Definition: EBITDA is calculated as net earnings (loss) from continuing operations before finance costs, income taxes and depreciation and amortization. Adjusted EBITDA is calculated as net earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization, Merger and related costs, acquisition and integration related costs, share-based compensation, defined benefit plans curtailment gain, impairment of assets, and foreign exchange gain/loss, net of related derivatives. In the fourth quarter of 2019, we amended our calculations of adjusted EBITDA and restated the comparative periods to exclude the impact of foreign exchange gain/loss, net of related derivatives, as foreign exchange changes are not indicative of our operating performance. We have also amended our calculations of adjusted EBITDA to adjust for acquisition and integration related costs for certain acquisitions such as Ruralco. There were no similar acquisitions in the comparative periods. Why we use the measure and why it is useful to investors: These are meaningful measures because they are not impacted by long-term investment and financing decisions, but rather focus on the performance of our day-to-day operations. These provide a measure of our ability to service debt and to meet other payment obligations. (millions of US dollars) Net earnings (loss) from continuing operations Finance costs Income tax expense (recovery) Depreciation and amortization EBITDA Merger and related costs Acquisition and integration related costs Share-based compensation Defined benefit plans curtailment gain Impairment of assets Foreign exchange loss (gain), net of related derivatives Adjusted EBITDA 1 Amount presented is the combined historical financial results of PotashCorp and Agrium. (millions of US dollars) Potash EBITDA Impairment of assets Potash adjusted EBITDA 2019 992 554 316 1,799 3,661 82 16 104 – 120 42 4,025 2018 (31) 538 (93) 1,592 2,006 170 – 116 (157) 1,809 (10) 3,934 2019 1,593 – 1,593 2017 1 656 515 20 1,221 2,412 178 – 92 – 305 35 3,022 2018 (203) 1,809 1,606 Adjusted EBITDA, Adjusted Net Earnings and Adjusted Net Earnings Per Share Guidance This guidance is provided on a non-IFRS basis. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with IFRS due to unknown variables and the Nutrien Annual Report 2019 63 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value that may be inherently difficult to determine, without unreasonable efforts. Guidance excludes the impacts of acquisition and integration related costs, share-based compensation and foreign exchange gain/loss, net of related derivatives. Adjusted Net Earnings and Adjusted Net Earnings Per Share Most directly comparable IFRS financial measure: Net earnings (loss) from continuing operations and net (loss) earnings per share from continuing operations. Definition: Net earnings from continuing operations before Merger and related costs, acquisition and integration related costs, share-based compensation, impairment of assets, purchase price allocation, defined benefit plans curtailment gain, dividend income of SQM and APC and foreign exchange gain/loss (net of related derivatives), net of tax. In the fourth quarter of 2019, we amended our calculations of adjusted net earnings and restated the comparative periods to exclude the impact of foreign exchange gain/loss, net of derivatives, as foreign exchange changes are not indicative of our operating performance. We have also amended our calculations of adjusted net earnings to adjust for acquisition and integration related costs for certain acquisitions such as Ruralco. There were no similar acquisitions in the comparative periods. Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations excluding the effects of non-operating items. (millions of US dollars, except as otherwise noted) Net earnings (loss) from continuing operations Adjustments: Merger and related costs Acquisition and integration related costs Share-based compensation Impairment of assets Foreign exchange loss (gain), net of related derivatives Purchase price allocation Defined benefit plans curtailment gain Dividend income of SQM and APC Increases (Decreases) 2019 Post-Tax 992 82 16 104 120 42 – – – 62 12 79 91 32 – – – Per Diluted Share Increases (Decreases) Post-Tax Per Diluted Share 2018 1.70 0.10 0.02 0.14 0.16 0.05 – – – 170 – 116 1,809 (10) 211 (157) 156 (31) (0.05) 130 – 89 1,320 (8) 161 (120) 130 1,671 0.21 – 0.14 2.11 (0.01) 0.26 (0.19) 0.21 2.68 Adjusted net earnings 1,268 2.17 Free Cash Flow and Free Cash Flow Including Changes in Non-Cash Working Capital Most directly comparable IFRS financial measure: Cash from operations before working capital changes. Definition: Cash from operations before working capital changes less sustaining capital expenditures and cash provided by operating activities from discontinued operations. We also calculate this measure including changes in non-cash working capital. Why we use the measure and why it is useful to investors: For evaluation of liquidity and financial strength, and as a component of employee remuneration calculations. These are also useful as an indicator of our ability to service debt, meet other payment obligations and make strategic investments. These do not represent residual cash flow available for discretionary expenditures. (millions of US dollars) Cash from operations before working capital changes Cash used in operating activities from discontinued operations Sustaining capital expenditures Free cash flow 2019 3,175 – (1,018) 2018 3,190 (130) (1,085) 2017 1 2,511 (200) (1,018) 2,157 1,975 1,293 Changes in non-cash working capital 490 (1,138) 57 Free cash flow including changes in non-cash working capital 2,647 837 1,350 1 Amount presented is the combined historical financial results of PotashCorp and Agrium. 64 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Gross Margin Excluding Depreciation and Amortization Per Tonne – Manufactured Most directly comparable IFRS financial measure: Gross margin. Definition: Gross margin per tonne from manufactured products less depreciation and amortization per tonne. Reconciliations are provided in the “Operating Segment Performance & Outlook” section. Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations, which excludes the effects of items that primarily reflect the impact of long-term investment and financing decisions. Potash Cash Cost of Product Manufactured (“COPM”) Most directly comparable IFRS financial measure: Cost of goods sold (“COGS”) for the Potash segment. Definition: Potash COGS for the period excluding depreciation and amortization expense and inventory and other adjustments divided by the production tonnes for the period. Why we use the measure and why it is useful to investors: To assess operational performance. Potash cash COPM excludes the effects of production from other periods and long-term investment decisions, supporting a focus on the performance of our day-to-day operations. (millions of US dollars, except as otherwise noted) Total COGS – Potash Change in inventory Other adjustments COPM Depreciation and amortization included in COPM Cash COPM Production tonnes (tonnes – thousands) Potash cash COPM per tonne 2019 1,103 10 (16) 1,097 (355) 742 11,700 63 2018 1,183 (5) (14) 1,164 (391) 773 12,842 60 Ammonia Controllable Cash COPM Most directly comparable IFRS financial measure: COGS for the Nitrogen segment. Definition: The total of COGS for the Nitrogen segment excluding depreciation and amortization expense included in COGS, cash COGS for products other than ammonia, other adjustments, and natural gas and steam costs, divided by net ammonia production tonnes. Why we use the measure and why it is useful to investors: To assess operational performance. Ammonia controllable cash COPM excludes the effects of production from other periods, the costs of natural gas and steam, and long-term investment decisions, supporting a focus on the performance of our day-to-day operations. (millions of US dollars, except as otherwise noted) Total COGS – Nitrogen Depreciation and amortization in COGS Cash COGS for products other than ammonia Ammonia Total cash COGS before other adjustments Other adjustments 1 Total cash COPM Natural gas and steam costs Controllable cash COPM Production tonnes (net tonnes 2 – thousands) Ammonia controllable cash COPM per tonne 1 Includes changes in inventory balances and other adjustments. 2 Ammonia tonnes available for sale, as not upgraded to other Nitrogen products. 2019 2,148 (462) (1,226) 460 (57) 403 (273) 130 2,887 45 2018 2,145 (442) (1,212) 491 (28) 463 (321) 142 3,320 43 Nutrien Annual Report 2019 65 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Adjusted Net Debt Most directly comparable IFRS financial measure: Long-term debt. Definition: Long-term and short-term debt plus lease liabilities (including their respective current portions) less cash and cash equivalents and related unamortized fair value adjustments. Why we use the measure and why it is useful to investors: As a component of adjusted net debt to adjusted EBITDA, it is used to evaluate our ability to pay our debts. See Note 26 to the financial statements for a reconciliation of adjusted net debt. Nutrien Financial Receivables Most directly comparable IFRS financial measure: Receivables. Definition: Refer to page 27 for details. Why we use the measure and why it is useful to investors: To differentiate a sub-group of receivables with lower credit risk. (millions of US dollars) Nutrien Financial Receivables Non-Nutrien Financial Receivables Receivables 2019 821 2,721 3,542 Retail Adjusted Average Working Capital to Sales Most directly comparable IFRS financial measure: (Current assets minus current liabilities for Retail) divided by Retail sales. Definition: Retail average working capital divided by Retail sales for the last four rolling quarters excluding working capital acquired in the quarter certain recent acquisitions, such as Ruralco, were completed. Why we use the measure and why it is useful to investors: To evaluate operational efficiency. A lower or higher percentage represents increased or decreased operational efficiency, respectively. (millions of US dollars, except as otherwise noted) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Average/Total Rolling four quarters ended December 31, 2019 Working capital Working capital from certain recent acquisitions Adjusted working capital Sales Adjusted average working capital to sales (%) 3,190 – 3,190 2,039 3,741 – 3,741 6,512 3,699 (75) 3,624 2,499 1,759 (138) 1,621 2,171 3,044 13,221 23 66 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Retail Cash Operating Coverage Ratio Most directly comparable IFRS financial measure: Retail operating expenses 1 as a percentage of Retail gross margin. Definition: Retail operating expenses excluding depreciation and amortization expense, divided by Retail gross margin excluding depreciation and amortization expense in cost of goods sold for the last four rolling quarters. Why we use the measure and why it is useful to investors: To understand the costs and underlying economics of our Retail operations and to assess our Retail operating performance and ability to generate free cash flow. Rolling four quarters ended December 31, 2019 (millions of US dollars, except as otherwise noted) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Gross margin Depreciation and amortization in cost of goods sold Gross margin excluding depreciation and amortization Operating expenses Depreciation and amortization in operating expenses Operating expenses excluding depreciation and amortization Cash operating coverage ratio (%) 409 2 411 571 (132) 439 1,440 1 1,441 749 (143) 606 655 2 657 617 (150) 467 736 2 738 667 (160) 507 Total 3,240 7 3,247 2,604 (585) 2,019 62 1 Includes Retail expenses below gross margin including selling expenses, general and administrative expenses and other (income) expenses. Retail Normalized Comparable Store Sales Most directly comparable IFRS financial measure: Retail sales from comparable base as a component of total Retail sales. Definition: Prior year comparable store sales adjusted for published potash, nitrogen and phosphate benchmark prices and foreign exchange rates used in the current year. We retain sales of closed locations in the comparable base if the closed location is in close proximity to an existing location, unless we plan to exit the market area or are unable to economically or logistically serve it. We do not adjust for temporary closures, expansions or renovations of stores. Why we use the measure and why it is useful to investors: To evaluate sales growth by adjusting for fluctuations in commodity prices and foreign exchange rates. Includes locations we have owned for more than 12 months. (millions of US dollars, except as otherwise noted) Sales from comparable base Current period Prior period Comparable store sales (%) Prior period normalized for benchmark prices and foreign exchange rates Normalized comparable store sales (%) 1 Certain immaterial figures have been reclassified for 2018. Retail EBITDA per US Selling Location Most directly comparable IFRS financial measure: Retail US EBITDA. 2019 2018 12,568 12,520 1 0 12,636 1 12,253 12,103 1 12,363 (1) (1) Definition: Total Retail US EBITDA for the last four rolling quarters adjusted for acquisitions in those quarters, divided by the number of US locations that have generated sales in the last four rolling quarters adjusted for acquired locations. Why we use the measure and why it is useful to investors: To assess our US Retail operating performance. Includes locations we have owned for more than 12 months. Rolling four quarters ended December 31, 2019 (millions of US dollars, except as otherwise noted) Q1 2019 Q2 2019 Q3 2019 Q4 2019 US EBITDA Adjustments for acquisitions US EBITDA adjusted for acquisitions Number of US selling locations adjusted for acquisitions EBITDA per US selling location (thousands of US dollars) (58) 672 142 143 Total 899 (27) 872 902 967 Nutrien Annual Report 2019 67 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Two Year Highlights The following information is not part of our MD&A on SEDAR and EDGAR and is furnished for those readers who may find value in the use of such information over the long term. In future years, we plan to expand the historical data in these tables as the information becomes available. Summary Financial Information (millions of US dollars, except as otherwise noted) Operations Sales Earnings before finance costs and income taxes Net earnings (loss) from continuing operations Net earnings Diluted net earnings (loss) per share from continuing operations Diluted net earnings per share Finance costs EBITDA 1 Adjusted EBITDA 1 Cash provided by operating activities Balance Sheet Total assets Short-term debt and long-term debt (including leases) Shareholders’ equity Common Share Information Weighted average common shares outstanding (millions) Closing share price on NYSE (USD) Total shareholder return percentage (%) Operating Segment Information Retail net sales 2 Potash net sales Nitrogen net sales 3 Phosphate net sales 3 Retail EBITDA Potash EBITDA Nitrogen EBITDA 3 Phosphate EBITDA 3 Capital Allocation Sustaining capital expenditures Investing capital expenditures Mine development and pre-stripping expenditures Acquisitions (net of cash acquired) Purchase of investments Dividends paid Payments for share repurchases 2019 2018 20,023 1,862 992 992 1.70 1.70 554 3,661 4,025 3,665 46,799 11,104 22,869 583 47.91 5.5 13,221 2,604 2,848 1,368 1,231 1,593 1,239 194 1,018 772 96 911 198 1,022 1,930 19,636 414 (31) 3,573 (0.05) 5.72 538 2,006 3,934 2,052 45,502 9,223 24,425 625 47.00 (6.6) 12,520 2,667 2,965 1,561 1,206 (203) 1,215 255 985 320 100 433 135 952 1,800 1 See the “non-IFRS financial measures” section. 2 Certain immaterial figures have been reclassified or grouped together for the year ended December 31, 2018. 3 Restated 2018 for the reclassification of sulfate from the Phosphate segment to the Nitrogen segment. See Note 2 to the financial statements. 68 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Summary Non-Financial Information Safety Total recordable injury frequency Lost-time injury frequency Life-altering injuries Environment Environmental incidents Community Community investment ($ millions) Taxes and royalties ($ millions) Employees Employees at December 31 Annual employee turnover rate (%) 1 Proportion of women (%) Proportion of women in senior leadership (director level and above) (%) 2019 2018 1.34 0.34 1 23 17 628 22,300 13 19 15 1.28 0.34 2 22 17 1,614 20,300 14 17 17 1 In 2019, we aligned our employee turnover definition with the Global Reporting Initiative definition used in our sustainability reporting and have restated 2018 figures. Summary Production and Sales Volumes Information Production (thousands) Potash production (Product tonnes) Nitrogen production (Ammonia tonnes) 1 Phosphate production (P2O5 tonnes) 2 Sales of manufactured product tonnes (thousands) Retail crop nutrient tonnes sold Potash tonnes sold Nitrogen tonnes sold 3 Phosphate tonnes sold 3 1 All figures are provided on a gross production basis. 2 Excludes Redwater. Comparative figures were restated to exclude Redwater. 3 Restated for the reclassification of sulfate from the Phosphate segment. See Note 3 to the financial statements. 2019 2018 11,700 6,164 1,514 11,048 11,521 10,270 2,889 12,842 6,372 1,551 10,689 13,019 10,598 3,272 Nutrien Annual Report 2019 69 Financial Statements P,E P,E P,E P,E P 76 At a Glance 77 Consolidated Statements of Earnings 77 Consolidated Statements of Comprehensive Income 78 Consolidated Statements of Cash Flows 79 Consolidated Statements of Changes in Shareholders’ Equity 80 Consolidated Balance Sheets 81 Note 1 Description of Business 81 Note 2 Basis of Presentation 82 Note 3 Segment Information 86 Note 4 Business Combinations 90 Note 5 Nature of Expenses 90 Note 6 Share-Based Compensation 92 Note 7 Other Expenses 93 Note 8 Finance Costs 93 Note 9 Income Taxes 97 Note 10 Discontinued Operations 97 Note 11 Net Earnings Per Share 98 Note 12 Financial Instruments and Related Risk Management P P,E 103 Note 13 Receivables P,E 104 Note 14 Inventories P,E 105 Note 15 Property, Plant and Equipment P,E 109 Note 16 Goodwill and Other Intangible Assets P,E 111 Note 17 Investments 113 Note 18 Other Assets 113 Note 19 Short-Term Debt 114 Note 20 Long-Term Debt 115 Note 21 Lease Liabilities 116 Note 22 Payables and Accrued Charges P,E 116 Note 23 Pension and Other Post-Retirement Benefits P,E 121 Note 24 Asset Retirement Obligations and Accrued Environmental Costs 123 Note 25 Share Capital 124 Note 26 Capital Management 125 Note 27 Commitments 126 Note 28 Guarantees 127 Note 29 Related Party Transactions 127 Note 30 Contingencies and Other Matters P E P,E 129 Note 31 Accounting Policies, Estimates and Judgments P Includes Accounting Policies E Includes Accounting Estimates and Judgments Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Management’s Responsibility Management’s Responsibility for Financial Reporting Management’s Report on Financial Statements The accompanying consolidated financial statements and related financial information are the responsibility of the management of Nutrien Ltd. (the “Company”). They have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) and include amounts based on estimates and judgments. Financial information included elsewhere in this report is consistent with the consolidated financial statements. The consolidated financial statements are approved by the Board of Directors on the recommendation of the audit committee. The audit committee of the Board of Directors is composed entirely of independent directors. The audit committee discusses and analyzes Nutrien’s interim condensed consolidated financial statements and Management’s Discussion and Analysis (“MD&A”) with management before such information is approved by the committee and submitted to securities commissions or other regulatory authorities. The audit committee and management also analyze the annual consolidated financial statements and MD&A prior to their approval by the Board of Directors. The audit committee duties also include reviewing critical accounting policies and significant estimates and judgments underlying the consolidated financial statements as presented by management and approving the fees of our independent registered public accounting firm. Our independent registered public accounting firm, KPMG LLP, performs an audit of the consolidated financial statements, the results of which are reflected in their report for 2019 included on Page 74. KPMG LLP have full and independent access to the audit committee to discuss their audit and related matters. 72 Nutrien Annual Report 2019 Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, as amended, and National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with IFRS. Under our supervision and with the participation of management, the Company conducted an evaluation of the design and effectiveness of our internal control over financial reporting as of the end of the fiscal year covered by this report, based on the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on this evaluation, management concluded that, as of December 31, 2019, the Company did maintain effective internal control over financial reporting. We completed the Ruralco acquisition on September 30, 2019 as more fully described in Note 4 of the Notes to the Consolidated Financial Statements. This business was excluded from management’s evaluation of the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2019 due to the proximity of the acquisition to year-end. The associated total assets represent approximately 2 percent of consolidated total assets and total revenues represent approximately 1 percent of consolidated revenues included in Nutrien’s 2019 consolidated financial statements. The effectiveness of the Company’s internal control over financial reporting as at December 31, 2019 has been audited by KPMG LLP, as reflected in their report for 2019 included on page 73. Chuck Magro President and Chief Executive Officer February 19, 2020 Pedro Farah Chief Financial Officer February 19, 2020 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Nutrien Ltd. Opinion on Internal Control Over Financial Reporting We have audited Nutrien Ltd. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of earnings, comprehensive income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the “consolidated financial statements”), and our report dated February 19, 2020 expressed an unqualified opinion on those consolidated financial statements. The Company acquired Ruralco Holdings Limited (“Ruralco”) during 2019, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, Ruralco’s internal control over financial reporting associated with 2 percent of total assets and 1 percent of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Ruralco. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Responsibility report. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Chartered Professional Accountants Calgary, Canada February 19, 2020 In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 73 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Nutrien Ltd. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Nutrien Ltd. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of earnings, comprehensive income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 19, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Change in Accounting Principle As discussed in Note 31 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of International Financial Reporting Standard 16, Leases. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Assessment of the carrying amount of goodwill for the Retail North America cash-generating unit As discussed in Note 16 to the consolidated financial statements, the carrying amount of goodwill as of December 31, 2019 was $11,986 million, of which $6,826 million of goodwill has been allocated to the Retail North America cash-generating unit. The Retail North America cash-generating unit is tested for impairment annually, and whenever events or changes in circumstances indicate that the carrying amount of the cash-generating unit, including goodwill, exceeds its estimated recoverable amount. The 74 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information assessment of the carrying amount of the Retail North America cash-generating unit involves a number of estimates including forecasted earnings before tax, interest, depreciation and amortization (“EBITDA”), terminal growth rate and the discount rate assumptions used to calculate the recoverable amount of the Retail North America cash-generating unit. We identified the assessment of the carrying amount of goodwill for the Retail North America cash-generating unit as a critical audit matter. Complex auditor judgment was required to evaluate the Company’s forecasted EBITDA, terminal growth rate and discount rate, which were used to calculate the recoverable amount of the Retail North America cash-generating unit. Minor changes to these assumptions have a significant effect on the Company’s assessment of the carrying amount of the goodwill. The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s goodwill impairment assessment process, including controls related to the determination of the recoverable amount of the Retail North America cash-generating unit, and the forecasted EBITDA, terminal growth rate and discount rate. We performed sensitivity analyses over the terminal growth rate and discount rate to assess their impact on the Company’s determination that the recoverable amount of the Retail North America cash- generating unit exceeded its carrying amount. We evaluated the Company’s forecasted EBITDA for the Retail North America cash-generating unit by comparing to historical results and forecasted planted acreage in the United States. We compared the terminal growth rate to historical growth of the Retail North America cash-generating unit and to market information, including forecasted inflation and forecasted gross domestic product in the United States. We compared the Company’s historical forecasts of EBITDA to actual results to assess the Company’s ability to accurately forecast. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in: (cid:129) Evaluating the Company’s method for estimating its discount rate, and testing assumptions used to estimate the discount rate to publicly available market data for comparable companies; and (cid:129) Evaluating the Company’s method for estimating the recoverable amount of the Retail North America cash-generating unit and comparing the results of the Company’s estimate to publicly available market data and valuation metrics for comparable companies. Chartered Professional Accountants We have served as the Company’s auditor since 2018. Calgary, Canada February 19, 2020 In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 75 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information 2019 At a Glance Find out more at nutrien.com 76 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Consolidated Financial Statements Consolidated Statements of Earnings For the years ended December 31 Note 2019 Sales Freight, transportation and distribution Cost of goods sold Gross Margin Selling expenses General and administrative expenses Provincial mining and other taxes Share-based compensation Impairment of assets Other expenses Earnings Before Finance Costs and Income Taxes Finance costs Earnings (Loss) Before Income Taxes Income tax expense (recovery) Net Earnings (Loss) from Continuing Operations Net earnings from discontinued operations Net Earnings Net Earnings (Loss) per share from Continuing Operations Basic Diluted Net Earnings per share from Discontinued Operations Basic Diluted Net Earnings per share (“EPS”) Basic Diluted Weighted average shares outstanding for basic EPS Weighted average shares outstanding for diluted EPS 3 5 5 5 5 5 6 15, 16 7 8 9 10 11 11 11 11 11 2018 Note 2 19,636 864 13,380 5,392 2,337 423 250 116 1,809 43 414 538 (124) (93) (31) 3,604 3,573 (0.05) (0.05) 5.77 5.77 5.72 5.72 20,023 768 13,814 5,441 2,505 404 292 104 120 154 1,862 554 1,308 316 992 – 992 1.70 1.70 – – 1.70 1.70 582,269,000 583,102,000 624,900,000 624,900,000 Consolidated Statements of Comprehensive Income For the years ended December 31 (net of related income taxes) Net Earnings Other comprehensive income (loss) Items that will not be reclassified to net earnings: Net actuarial gain on defined benefit plans Net fair value loss on investments Items that have been or may be subsequently reclassified to net earnings: Gain (loss) on currency translation of foreign operations Other Other Comprehensive Income (Loss) Comprehensive Income (See Notes to the Consolidated Financial Statements) 2019 992 2018 3,573 7 (25) 47 7 36 1,028 54 (99) (249) (8) (302) 3,271 In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 77 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Consolidated Statements of Cash Flows For the years ended December 31 Note 2019 Operating Activities Net earnings Adjustments for: Depreciation and amortization Share-based compensation Impairment of assets Provision for (recovery of) deferred income tax Gain on sale of investments in Sociedad Quimica y Minera de Chile S.A. 6 15, 16 (“SQM”) and Arab Potash Company (“APC”) Income tax related to the sale of the investment in SQM Other long-term liabilities and miscellaneous Cash from operations before working capital changes Changes in non-cash operating working capital: Receivables Inventories Prepaid expenses and other current assets Payables and accrued charges Cash Provided by Operating Activities Investing Activities Additions to property, plant and equipment Additions to intangible assets Business acquisitions, net of cash acquired Proceeds from disposal of discontinued operations, net of tax Purchase of investments Cash acquired in Merger Other Cash (Used in) Provided by Investing Activities Financing Activities Transaction costs on long-term debt Proceeds from (repayment of) short-term debt, net Proceeds from long-term debt Repayment of long-term debt Repayment of principal portion of lease liabilities Dividends paid Repurchase of common shares Issuance of common shares Cash Used in Financing Activities Effect of Exchange Rate Changes on Cash and Cash Equivalents (Decrease) Increase in Cash and Cash Equivalents Cash and Cash Equivalents – Beginning of Year Cash and Cash Equivalents – End of Year Cash and cash equivalents 1 comprised of: Cash Short-term investments Supplemental Cash Flows Information Interest paid Income taxes paid Total cash outflow for leases 15 16 4 10 4 19 20 20 20 25 25 25 992 1,799 104 120 177 – – (17) 3,175 (64) 190 (238) 602 3,665 (1,728) (163) (911) 55 (198) – 147 (2,798) (29) 216 1,510 (1,010) (234) (1,022) (1,930) 20 (2,479) (31) (1,643) 2,314 671 532 139 671 505 29 345 2018 Note 2 3,573 1,592 116 1,809 (290) (4,399) 977 (188) 3,190 (153) (887) 561 (659) 2,052 (1,405) (102) (433) 5,394 (135) 466 102 3,887 (21) (927) – (12) – (952) (1,800) 7 (3,705) (36) 2,198 116 2,314 1,506 808 2,314 507 1,155 – 1 Highly liquid investments with a maturity of three months or less from the date of purchase are considered to be cash equivalents. (See Notes to the Consolidated Financial Statements) 78 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Consolidated Statements of Changes in Shareholders’ Equity Accumulated Other Comprehensive (Loss) Income (“AOCI”) Share Capital Contributed Surplus Net Fair Value Gain (Loss) on Investments Net Actuarial Gain on Defined Benefit Plans 1 Loss on Currency Translation of Foreign Operations Other Balance – December 31, 2017 Merger impact (Note 4) Net earnings Other comprehensive (loss) income Shares repurchased (Note 25) Dividends declared Effect of share-based compensation including issuance of common shares Transfer of net actuarial gain on defined benefit plans Transfer of net loss on sale of investment Transfer of net loss on cash flow hedges Balance – 1,806 15,898 – – (998) – 230 7 – – (23) – 34 17 – – – – – – December 31, 2018 16,740 231 Net earnings Other comprehensive (loss) income Shares repurchased (Note 25) Dividends declared Effect of share-based compensation including issuance of common shares Transfer of net actuarial gain on defined benefit plans Transfer of net loss on sale of investment Transfer of net loss on cash flow hedges Balance – – – (992) – – – – – 23 17 – – – – – – 73 – – (99) – – – – 19 – (7) – (25) – – – – 3 – December 31, 2019 15,771 248 (29) – – – 54 – – – (54) – – – – 7 – – – (7) – – – Total AOCI Retained Earnings Total Equity 2 25 – – 6,242 (1) 3,573 (302) – – – (831) (1,273) 8,303 15,904 3,573 (302) (1,852) (1,273) – (54) 19 21 – 54 (19) – 51 – – 21 (2) – – (249) – – – – – – (46) – – (8) – – – – – 21 (251) (33) (291) 7,745 24,425 – 47 – – – – – – – 7 – – – – – 8 – 36 – – – (7) 3 8 992 992 – (886) (754) 36 (1,878) (754) – 7 (3) – 40 – – 8 (204) (18) (251) 7,101 22,869 1 Any amounts incurred during a period were closed out to retained earnings at each period-end. Therefore, no balance exists at the beginning or end of period. 2 All equity transactions were attributable to common shareholders. (See Notes to the Consolidated Financial Statements) In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 79 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Consolidated Balance Sheets As at December 31 Assets Current assets Cash and cash equivalents Receivables Inventories Prepaid expenses and other current assets Non-current assets Property, plant and equipment Goodwill Other intangible assets Investments Other assets Total Assets Liabilities Current liabilities Short-term debt Current portion of long-term debt Current portion of lease liabilities Payables and accrued charges Non-current liabilities Long-term debt Lease liabilities Deferred income tax liabilities Pension and other post-retirement benefit liabilities Asset retirement obligations and accrued environmental costs Other non-current liabilities Total Liabilities Shareholders’ Equity Share capital Contributed surplus Accumulated other comprehensive loss Retained earnings Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity (See Notes to the Consolidated Financial Statements) Approved by the Board of Directors, Note 2019 2018 13 14 15 16 16 17 18 19 20 21 22 20 21 9 23 24 25 671 3,542 4,975 1,477 2,314 3,342 4,917 1,089 10,665 11,662 20,335 11,986 2,428 821 564 46,799 976 502 214 7,437 9,129 8,553 859 3,145 433 1,650 161 18,796 11,431 2,210 878 525 45,502 629 995 8 6,703 8,335 7,579 12 2,907 395 1,673 176 23,930 21,077 15,771 248 (251) 7,101 22,869 46,799 16,740 231 (291) 7,745 24,425 45,502 Director Director 80 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 1 Description of Business Nutrien Ltd. (collectively with its subsidiaries, “Nutrien”, “we”, “us”, “our” or “the Company”) is the world’s largest provider of crop inputs and services. Nutrien plays a critical role in helping growers around the globe increase food production in a sustainable manner. The Company is a corporation organized under the laws of Canada with its registered head office located at Suite 500, 122 – 1st Avenue South, Saskatoon, Saskatchewan, Canada. As at December 31, 2019, the Company had assets as follows: Retail (cid:129) seven upgrade facilities in North America: three in Alberta and one each in Alabama, Georgia, Missouri, and Washington (cid:129) 50 percent investment in Profertil S.A. (“Profertil”), a nitrogen producer based in Argentina (cid:129) various retail facilities across the US, Canada, Australia and (cid:129) 26 percent investment in Misr Fertilizers Production South America (cid:129) private label and proprietary crop protection products and nutritionals Company S.A.E. (“MOPCO”), a nitrogen producer based in Egypt Phosphate (cid:129) an innovative integrated digital platform for growers and (cid:129) two mines and processing plants: one in Florida and one in crop consultants Potash North Carolina (cid:129) phosphate feed plants in Illinois, Missouri and Nebraska (cid:129) six operations in the province of Saskatchewan Nitrogen (cid:129) an industrial phosphoric acid plant in Ohio Corporate and Others (cid:129) eight production facilities in North America: four in Alberta (cid:129) investment in Canpotex Limited (“Canpotex”), a Canadian and one each in Georgia, Louisiana, Ohio and Texas (cid:129) one large-scale operation in Trinidad Note 2 Basis of Presentation potash export, sales and marketing company owned in equal shares by Nutrien and another potash producer (cid:129) 22 percent investment in Sinofert Holdings Limited (“Sinofert”), a fertilizer supplier and distributor in China These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). We have consistently applied the same accounting policies throughout all periods presented, as if these policies had always been in effect, with the exception of IFRS 16, “Leases” (“IFRS 16”), which was adopted effective January 1, 2019, the impacts of which are disclosed in Note 31. Certain immaterial 2018 figures have been reclassified or grouped together in the consolidated statements of earnings, consolidated statements of cash flows, segment information and nature of expenses. These consolidated financial statements were authorized for issue by the Board of Directors on February 19, 2020. Where an accounting policy is applicable to a specific note to the consolidated financial statements, the policy is described within that note, with the related financial disclosures by major caption as noted in the table of contents. Certain of our accounting policies that relate to the consolidated financial statements as a whole, as well as estimates and judgments we have made and how they affect the amounts reported in the consolidated financial statements, are disclosed in Note 31. Sensitivity analyses included throughout the notes should be used with caution as the changes are hypothetical and not reflective of future performance. The sensitivities have been calculated independently of changes in other key variables. Changes in one factor may result in changes in another, which could increase or reduce certain sensitivities. These consolidated financial statements were prepared under the historical cost basis, except for items that IFRS requires to be measured at fair value. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 81 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 3 Segment Information The Company has four reportable operating segments: Retail, Potash, Nitrogen and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seed and merchandise, and provides services directly to growers through a network of farm centers in North and South America and Australia. The Potash, Nitrogen and Phosphate segments are differentiated by the chemical nutrient contained in the products that each produces. Accounting Policies, Estimates and Judgments Operating Segments We identified the Executive Leadership Team (“ELT”), comprised of officers at the Executive Vice President level and above, as the Chief Operating Decision Maker (“CODM”). The CODM uses net earnings (loss) before finance costs, income taxes, and depreciation and amortization (“EBITDA”) to measure performance and allocate resources to the operating segments. The CODM considers EBITDA a meaningful measure because it is not impacted by long-term investment and financing decisions, but rather focuses on the performance of our day-to-day operations. In 2019, the CODM reassessed our product groupings and decided to evaluate the performance of ammonium sulfate as part of the Nitrogen segment, rather than the Phosphate and Sulfate segment, as previously reported in our 2018 annual consolidated financial statements. Comparative amounts for the Nitrogen and Phosphate segments were restated. For the year ended December 31, 2018, Nitrogen reflected increases of $121, $40, and $53 in sales, gross margin and EBITDA, respectively, and $377 in assets, with corresponding decreases in Phosphate. In addition, the “Others” segment was renamed to “Corporate and Others”. Judgment is used in determining the composition of the reportable segments based on factors including risks and returns, internal organization, and internal reports reviewed by the CODM. Certain expenses are allocated across segments based on reasonable considerations such as production capacities or historical trends. Revenue We recognize revenue when we transfer control over a good or service to a customer. Transfer of Control for Retail Potash, Nitrogen and Phosphate Sale of Goods At the point in time when the product is At the point in time when the product is (cid:129) purchased at our Retail farm center or (cid:129) delivered and accepted by customers at (cid:129) loaded for shipping or (cid:129) delivered to the customer. their premises. Services Over time as the promised service is rendered. Over time as the promised service is rendered. For transactions in which we act as an agent rather than the principal, revenue is recognized net of any commissions earned. The relating commissions are recognized as the sales occurred or as unconditional contracts are signed. Retail Retail revenue is generated primarily from sales of the following: Crop nutrients Crop protection products Seed Merchandise Dry and liquid macronutrient products including potash, nitrogen and phosphate, proprietary liquid micronutrient products and nutrient application services. Various third-party supplier and proprietary products designed to maintain crop quality and manage plant diseases, weeds, and other pests. Various third-party supplier seed brands and proprietary seed product lines. Fencing, feed supplements, livestock-related animal health products, storage and irrigation equipment, and other products. Services and other revenues Product application, soil and leaf testing, crop scouting and precision agriculture services, water services, financial services and livestock marketing. Provisions for returns, trade discounts and rebates are deducted from sales revenue. 82 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 3 Segment Information Continued Potash, Nitrogen and Phosphate Our sales revenue is recorded and measured based on the “freight on board” mine, plant, warehouse or terminal price specified in the contract (except for certain vessel sales or specific product sales that are shipped and recorded on a delivered basis), which reflects the consideration we expect to be entitled to in exchange for the goods or services, net of any variable consideration (e.g., any trade discounts or estimated volume rebates). Where customer contracts include volume rebates, we estimate revenue at the earlier of the most likely amount of consideration we expect to receive or when it is highly probable that a significant reversal will not occur. Our customer contracts may provide certain product quality specification guarantees but do not generally provide for refunds or returns. Sales prices are based on North American and International benchmark market prices which are variable and subject to global supply and demand and other market factors. Potash Nitrogen Phosphate Products (cid:129) North American – primarily (cid:129) Ammonia, urea, urea granular (cid:129) Offshore (international) – primarily granular and standard ammonium nitrate, industrial grade ammonium nitrate and ammonium sulfate (cid:129) Solid fertilizer, liquid fertilizer, industrial products and feed products Sales prices impacted by (cid:129) North American prices (cid:129) Global energy costs and supply (cid:129) Global prices and supplies of referenced at delivered prices (including transportation and distribution costs) (cid:129) International prices referenced at the mine site (excluding transportation and distribution costs) ammonia and sulfur Other We do not provide general warranties. Intersegment sales are made under terms that approximate market value. Transportation costs are generally recovered from the customer through sales pricing. We elected to use the practical expedient related to the adjustment of the promised consideration for the effects of a significant financing component as the expected period between when control over a promised good or service is transferred and when the customer pays for that good or service is less than 12 months. Seasonality in our business results from increased demand for products during planting season. Crop input sales are generally higher in spring and fall crop input application seasons. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete, while customer prepayments made to us are typically concentrated in December and January and inventory prepayments paid to our vendors are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year. For product sales with volume rebates, revenue is recognized to the extent that it is highly probable that significant reversals will not occur using the most likely method and accumulated experience. Returns and incentives are estimated based on historical and forecasted data, contractual terms and current conditions. Due to the nature of goods and services sold, any single estimate would have only a negligible impact on revenue. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 83 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 3 Segment Information Continued Supporting Information Financial information on each of these segments is summarized in the following tables: Retail Potash Nitrogen Phosphate Corporate and Others Eliminations Consolidated 2019 Sales – third party – intersegment Sales – total Freight, transportation and distribution 13,221 – Net sales Cost of goods sold Gross margin Selling expenses General and administrative expenses Provincial mining and other taxes Share-based compensation expense Impairment of assets (Note 15 and 16) Other expenses (income) Earnings (loss) before finance costs and income taxes Depreciation and amortization EBITDA Assets 1 13,183 38 13,221 9,981 3,240 2,484 112 – – – 8 2,702 207 2,909 305 2,604 1,103 1,501 9 6 287 – – (4) 636 595 1,203 390 2,608 612 3,220 372 2,848 2,148 700 25 15 2 – – (46) 704 535 1,397 203 1,600 232 1,368 1,373 (5) 5 7 1 – – 25 (43) 237 194 1,231 1,593 1,239 19,990 11,696 10,991 2,198 133 – 133 – 133 133 – (18) 264 2 104 120 171 (643) 42 (601) 2,129 – (1,060) (1,060) (141) (919) (924) 5 – – – – – – 5 – 5 20,023 – 20,023 768 19,255 13,814 5,441 2,505 404 292 104 120 154 1,862 1,799 3,661 (205) 46,799 1 Included in the Retail and Nitrogen segments are $126 and $482, respectively, relating to equity-accounted investees as described in Note 17. 2018 Sales – third party – intersegment Sales – total Freight, transportation and distribution 12,520 – Net sales Cost of goods sold Gross margin Selling expenses General and administrative expenses Provincial mining and other taxes Share-based compensation expense Impairment of assets (Note 15) Other (income) expenses Earnings (loss) before finance costs and income taxes Depreciation and amortization EBITDA Assets 2 Retail Potash Nitrogen 1 Phosphate 1 Corporate and Others Eliminations Consolidated 12,470 50 12,520 9,485 3,035 2,303 100 – – – (75) 707 499 1,206 2,796 220 3,016 349 2,667 1,183 1,484 14 10 244 – 1,809 14 (607) 404 (203) 2,712 626 3,338 373 2,965 2,145 820 32 20 3 – – (8) 773 442 1,215 1,508 268 1,776 215 1,561 1,473 88 10 9 1 – – 6 62 193 255 150 – 150 – 150 150 – (22) 284 2 116 – 106 (486) 54 (432) – (1,164) (1,164) (73) (1,091) (1,056) (35) – – – – – – (35) – (35) 19,636 – 19,636 864 18,772 13,380 5,392 2,337 423 250 116 1,809 43 414 1,592 2,006 17,964 11,710 10,386 2,406 3,678 (642) 45,502 1 Comparative figures have been restated to reflect the change in the sulfate product grouping from Phosphate and Sulfate to Nitrogen. 2 Included in the Retail and Nitrogen segments are $208 and $428, respectively, relating to equity-accounted investees as described in Note 17. 84 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 3 Segment Information Continued Financial information by geographic area is summarized in the following tables: Sales – Third Party United States Canada Australia Canpotex 1 Trinidad Argentina Europe Other 2019 12,522 2,504 1,955 1,625 113 388 210 706 20,023 2018 11,891 2,790 1,681 1,657 190 387 312 728 19,636 1 As described in Note 1, Canpotex executed offshore marketing, sales and distribution functions for certain of our products. Canpotex’s 2019 sales volumes were made to: Latin America 31 percent, China 22 percent, India 10 percent, Other Asian markets 27 percent, Other markets 10 percent (2018 – Latin America 33 percent, China 18 percent, India 10 percent, Other Asian markets 31 percent, Other markets 8 percent) (Note 29). Non-Current Assets 1 United States Canada Australia Trinidad Other 2019 15,685 17,503 1,172 691 639 35,690 2018 14,501 17,100 607 570 621 33,399 1 Excludes financial instruments (other than equity-accounted investees), deferred tax assets and post-employment benefit assets. We disaggregated revenue from contracts with customers by product line or geographic location for each reportable segment to show how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Sales reported under our Corporate and Others segment primarily relates to our non-core Canadian business. Retail sales by product line Crop nutrients Crop protection products Seed Merchandise Services and other 2019 2018 4,989 4,983 1,712 598 939 4,577 4,862 1,687 584 810 13,221 12,520 In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 85 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 3 Segment Information Continued Potash sales by geography Manufactured product North America Offshore 1 Other potash and purchased products Nitrogen sales by product line 2 Manufactured product Ammonia Urea Solutions, nitrates and sulfates Other nitrogen and purchased products Phosphate sales by product line 2 Manufactured product Fertilizer Industrial and feed Other phosphate and purchased products 2019 2018 1,283 1,625 1 2,909 884 1,019 812 505 3,220 944 475 181 1,600 1,356 1,657 3 3,016 1,061 979 825 473 3,338 1,141 469 166 1,776 1 Relates to Canpotex. 2 Comparative figures have been restated to reflect the change in the sulfate product grouping from Phosphate and Sulfate to Nitrogen. Note 4 Business Combinations The Company’s business combinations include the merger between Potash Corporation of Saskatchewan Inc. (“PotashCorp”) and Agrium Inc. (“Agrium”) (the “Merger”), the acquisition of Retail businesses, including Ruralco Holdings Limited (“Ruralco”), and various digital agriculture, proprietary products and agricultural services. Accounting Policies, Estimates and Judgments (cid:129) Consideration is measured at the aggregate of the fair values of assets transferred, liabilities incurred or assumed, and equity instruments issued in exchange for control of the acquiree at the acquisition date. (cid:129) The excess of total consideration for each acquisition plus non-controlling interest in the acquiree, over the fair value of the identifiable net assets acquired, is recorded as goodwill. (cid:129) Identifiable assets acquired and liabilities assumed are (cid:129) For each business combination, we elect to measure the generally measured at fair value. non-controlling interest in the acquired entity either at fair value or at the proportionate share of the acquiree’s identifiable net assets. 86 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 4 Business Combinations Continued Judgment is required to determine which entity is the acquirer in a merger of equals. In identifying PotashCorp as the acquirer in the Merger, we considered the voting rights of all equity instruments, the intended corporate governance structure of the combined company, the intended composition of senior management of the combined company and the size of each of the companies. In assessing the size of each of the companies, we evaluated various metrics. No single factor was the sole determinant in the overall conclusion that PotashCorp was the acquirer for accounting purposes in the Merger; rather, all factors were considered in arriving at the conclusion. Asset Ruralco Merger Other Acquisitions Property, plant and equipment X X Other intangible assets X X X X Long-term debt Asset retirement obligations and accrued environmental costs X X Purchase price allocation involves judgment in identifying assets acquired and liabilities assumed, and estimation of their fair values. To determine fair values, we used quoted market prices or widely accepted valuation techniques as described below. Key assumptions include discount rates and revenue growth rates specific to the acquired assets or liabilities assumed. We performed a thorough review of all internal and external sources of information available on circumstances that existed at the acquisition date. We also engaged independent valuation experts on certain acquisitions to assist in determining the fair value of certain assets acquired and liabilities assumed and related deferred income tax impacts. Valuation Technique and Judgments Applied Market approach for land and certain types of personal property: sales comparison that measures the value of an asset through an analysis of sales and offerings of comparable assets. Replacement costs for all other depreciable property, plant and equipment: measures the value of an asset by estimating the costs to acquire or construct comparable assets and adjusts for age and condition of the asset. Income approach – multi-period excess earnings method: measures the value of an asset based on the present value of the incremental after-tax cash flows attributable to the asset after deducting contributory asset charges (“CACs”). Allocation of CACs is a matter of judgment and based on the nature of the acquired businesses’ operations and historical trends. We considered several factors in determining the fair value of customer relationships, such as customers’ relationships with the acquired company and its employees, the segmentation of customers, historical customer attrition rates and revenue growth. Segmenting customers is a matter of judgment and includes factors such as the size of the customer and customer behavior patterns. Comparable debt instruments with similar maturities, adjusted where necessary to the acquired company’s credit spread, based on information published by financial institutions. Decision-tree approach of future costs and a risk premium to capture the compensation sought by risk-averse market participants for bearing the uncertainty inherent in the cash flows of the liability. We expect asset retirement obligations for phosphate sites to be paid over the next 68 years, while we expect asset retirement obligations for potash and nitrogen sites to be paid subsequently. We expect accrued environmental costs – discounted using a credit adjusted risk-free rate – to be paid over the next 30 years. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 87 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 4 Business Combinations Continued Supporting Information Acquisition date September 30, 2019 January 1, 2018 Various Ruralco Merger Other Acquisitions Purchase price, net of cash and cash equivalents acquired $330 $16,010 On the acquisition date, we acquired 100% of the Ruralco stock that was issued and outstanding. Also included in the total consideration, net of cash and cash equivalents acquired, is the impact of $18 relating to a foreign exchange hedge loss which we designated a cash flow hedge. Transaction costs are recorded in acquisition and integration related costs in other expenses. We determined the purchase price based on the number of Agrium shares outstanding and their trading price on December 29, 2017. On the acquisition date, shareholders of PotashCorp received 0.400 common shares of Nutrien for each PotashCorp share held, and shareholders of Agrium received 2.230 common shares of Nutrien for each Agrium share held. Merger and related costs are included in other expenses. $11,185, none of which is deductible for income tax purposes. 2019 – $581, net of $100 previously held equity- accounted interest in Agrichem. We acquired the remaining 20 percent interest in Agrichem in the first nine months of 2019, making Agrichem a wholly owned consolidated subsidiary of the Company. (2018 – $433) $341 (2018 – $197) Goodwill and expected benefits of the acquisition $202 The expected benefits of the acquisitions resulting in goodwill include: (cid:129) synergies from expected reduction in operating costs; (cid:129) wider distribution channel for selling products of acquired businesses; (cid:129) a larger assembled workforce; (cid:129) potential increase in customer base; (cid:129) enhanced ability to innovate; (cid:129) production and expense optimization, including procurement savings (specific to Merger); and (cid:129) closer proximity of nitrogen operations to sources of low-cost natural gas (specific to Merger). Description An agriservices business in Australia with approximately 250 operating locations. A major global producer and distributor of agricultural products, services and solutions. 68 Retail locations in North and South America and Australia, including companies operating in the proprietary products business, such as Actagro, LLC, a developer, manufacturer and marketer of environmentally sustainable soil and plant health products and technologies (2018 – 53 Retail locations in North America and Australia and companies operating within the digital agriculture, proprietary products and agricultural services businesses). 88 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 4 Business Combinations Continued We allocated the following values to the acquired assets and assumed liabilities based upon fair values at their respective acquisition date: 2019 Ruralco (Estimate) 2018 Preliminary 1 Adjustments 2 Revised Fair Value Other Acquisitions 3 Merger (Final) Other Acquisitions 3 Cash and cash equivalents Receivables Inventories Prepaid expenses and other current assets Property, plant and equipment Goodwill Other intangible assets Investments Other assets Total assets Short-term debt Payables and accrued charges Long-term debt, including current portion Lease liabilities, including current portion Deferred income tax liabilities Pension and other post-retirement benefit liabilities Asset retirement obligations and accrued environmental costs Other non-current liabilities Total liabilities Total consideration Previously held equity-accounted interest in Agrichem Total consideration, net of cash and cash equivalents acquired – 250 116 11 70 272 55 15 16 805 112 299 – 44 7 – – 13 475 330 – 330 – 39 1 (3) 66 (70) 110 – – 143 – 46 – 66 31 – – – 143 – – – – 289 4 117 8 136 202 165 15 16 5 948 112 345 – 110 38 – – 13 618 330 – 330 – 68 145 38 115 341 179 – 2 888 25 156 11 1 7 – – 7 207 681 100 466 2,600 4 3,303 1,124 7,459 11,185 2,348 528 293 5 29,306 867 5,239 4,941 – 934 142 1,094 79 13,296 16,010 – – 20 146 2 107 197 8 11 3 494 – 52 – – – – – 9 61 433 – 581 16,010 433 1 Preliminary value as previously reported in our third quarter 2019 unaudited financial statements. The purchase price allocation is not final as we continue to obtain and verify information required to determine the fair value of certain assets and liabilities and the amount of deferred income taxes arising on their recognition. We estimated the preliminary purchase price allocation as of the date of the acquisition based on information that was available and continue to adjust those estimates as new information that existed at the date of acquisition becomes available. We expect to finalize the amounts recognized when we obtain the information necessary to complete the analysis, and in any event, not later than September 30, 2020. 2 We recorded adjustments to the preliminary fair value to reflect facts and circumstances in existence as of the date of acquisition. These adjustments primarily related to changes in the preliminary valuation assumptions, including refinement of intangible assets. All measurement period adjustments were offset against goodwill. 3 This represents preliminary fair values. For certain acquisitions, we finalized the purchase price with no material change to the fair values disclosed in prior periods. 4 Includes receivables from customers with gross contractual amounts of $247, of which $5 are considered to be uncollectible relating to Ruralco (2018 – $2,247 and $80 respectively relating to the Merger). 5 Includes deferred income tax assets of $14 relating to Ruralco (2018 – $158 relating to the Merger). Financial Information Related to the Acquired Operations 2019 Proforma 1 Sales EBITDA Ruralco Other Acquisitions 1,090 50 480 40 1 Estimated annual sales and EBITDA if acquisitions occurred at the beginning of the year. Net earnings before income taxes is not available. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 89 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 4 Business Combinations Continued From date of acquisition Sales Net earnings (loss) before income taxes Note 5 Nature of Expenses 2019 Actuals 2018 Actuals Ruralco Other Acquisitions 249 (2) 312 (1) Merger 14,551 546 Other Acquisitions 213 10 Purchased and produced raw materials and product for resale 1 Depreciation and amortization Employee costs 2 Freight Impairment of assets (Note 15 and 16) Provincial mining and other taxes 3 Offsite warehouse costs 4 Railcar and vessel costs 4 Merger and related costs Acquisition and integration related costs Contract services Lease expense 5 Fleet fuel, repairs and maintenance Other Total cost of goods sold and expenses 2019 11,335 1,799 2,268 845 120 292 51 5 82 16 504 66 202 576 18,161 2018 10,881 1,592 1,949 934 1,809 250 68 128 170 – 469 148 183 641 19,222 1 Significant expenses include: supplies, energy, fuel, purchases of raw material (natural gas – feedstock, sulfur, ammonia and reagents) and product for resale (crop nutrients and protection products, and seed). 2 Includes employee benefits and share–based compensation. In 2018, employee costs also include a $157 gain on curtailment of defined benefit pension and other post-retirement benefit plans (“Defined Benefit Plans Curtailment Gain”) as described in Note 23. 3 Includes $190 and $102 (2018 – $160 and $90) relating to Saskatchewan potash production tax and Saskatchewan resource surcharge and other, respectively, as required under Saskatchewan provincial legislation. 4 Includes expenses relating to operating leases in 2018. 5 In 2019, includes lease expense relating to short-term leases, leases of low-value and variable lease payments. Note 6 Share-Based Compensation We have share-based compensation plans (including those assumed from PotashCorp and Agrium) for eligible employees and directors as part of their remuneration package, including Stock Options, Performance Share Units (“PSUs”), Restricted Share Units (“RSUs”) and Deferred Share Units (“DSUs”). Accounting Policies, Estimates and Judgments For awards with performance conditions that determine the number of options or units to which employees are entitled, measurement of compensation cost is based on our best estimate of the outcome of the performance conditions. Changes to vesting assumptions are reflected in earnings immediately for compensation cost already recognized. For plans settled through the issuance of equity (cid:129) fair value for stock options is determined on grant date using the Black-Scholes-Merton option-pricing model, and (cid:129) fair value for PSUs is determined on grant date by projecting the outcome of performance conditions. For plans settled through cash, a liability is recorded based on the fair value of the awards each period. 90 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 6 Share-Based Compensation Continued Estimation involves determining: (cid:129) stock option-pricing model assumptions as described in the weighted average assumptions table; (cid:129) forfeiture rate for options granted based on past experience and future expectations, and adjusted upon actual vesting; (cid:129) projected outcome of performance conditions for PSUs, including the relative ranking of our total shareholder Supporting Information return, including expected dividends, compared with a specified peer group using a Monte Carlo simulation option- pricing model and the outcome of our synergies relative to the target; and (cid:129) the number of dividend equivalent units expected to be earned. The following summarizes the Nutrien share-based compensation plans, under which we have awards available to be granted, and the assumed legacy plans of PotashCorp and Agrium, under which no awards will be granted. Plan Features Stock Options PSUs RSUs DSUs SARs/TSARs 4 Eligibility Officers and eligible employees Officers and eligible employees Eligible employees Non-executive directors Granted Annually Annually Annually At the discretion of the Board of Directors Awards no longer granted; legacy awards only Awards no longer granted; legacy awards only Vesting Period 25% per year over four years 1 On third anniversary of grant date based on total shareholder return over a three-year performance cycle, compared to average total shareholder return of a peer group of companies over the same period On third anniversary of grant date and are not subject to performance conditions Fully vest upon grant 25% per year over four years Maximum Term 10 years Not applicable Not applicable Not applicable 10 years Settlement Shares Cash / Shares 2 Cash Cash 3 Cash 1 Under the assumed legacy PotashCorp long-term incentive and performance option plan, stock options vest on the third anniversary of the grant date. 2 Under the assumed legacy PotashCorp long-term incentive plan, PSUs will be settled in shares for grantees who are subject to our share ownership guidelines and in cash for all other grantees. 3 Based on the common share price at the time of the director’s departure from the Board of Directors. 4 Under the assumed legacy Agrium stock appreciation rights (“SARs”) plan, holders of tandem stock appreciation rights (“TSARs”) have the ability to choose between (a) receiving in cash the price of our shares on the date of exercise in excess of the exercise price of the right or (b) receiving common shares by paying the exercise price of the right. Our past experience and future expectation is that substantially all TSAR holders will elect to choose the first option. The weighted average fair value of stock options granted was estimated as of the date of the grant using the Black-Scholes-Merton option-pricing model. The weighted average grant date fair value of stock options per unit granted in 2019 was $11.27 (2018 – $9.71). The weighted average assumptions by year of grant that impacted current year results are as follows: Assumptions Exercise price per option Expected annual dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Average expected life of options (years) Based On Quoted market closing price 1 Annualized dividend rate 2 Historical volatility 3 Zero-coupon government issues 4 Historical experience 1 Of common shares on the last trading day immediately preceding the date of the grant. 2 As of the date of grant. 3 Of the Company’s share over a period commensurate with the expected life of the option. 4 Implied yield available on equivalent remaining term at the time of the grant. Year of Grant 2019 53.54 3.22 27 2.55 7.5 2018 44.50 3.58 29 2.79 7.5 In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 91 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 6 Share-Based Compensation Continued A summary of the status of our stock option plans as at December 31, 2019 and 2018 and changes during the years ending on those dates is as follows: Balance – beginning of year Granted Exercised Forfeited or cancelled Expired Outstanding – end of year Number of Shares Subject to Option Weighted Average Exercise Price 2019 9,044,237 1,376,533 (451,574) (502,016) (275,700) 9,191,480 2018 9,947,583 1,875,162 (647,331) (1,793,077) (338,100) 9,044,237 2019 58.41 53.54 42.73 86.53 76.59 56.88 2018 69.54 44.50 42.86 82.84 154.94 58.41 The aggregate grant-date fair value of all stock options granted during 2019 was $16. The average share price during 2019 was $50.91 per share. The following table summarizes information about our stock options outstanding as at December 31, 2019 with expiry dates ranging from May 2020 to February 2029: Range of Exercise Prices $37.84 to $40.23 $40.24 to $45.40 $45.41 to $49.51 $49.52 to $52.75 $52.76 to $77.62 $77.63 to $130.78 Options Outstanding Weighted Average Remaining Life in Years Weighted Average Exercise Price 6 7 7 5 8 3 6 38.21 43.61 46.46 51.96 58.58 93.56 56.88 Number 1,345,235 1,934,844 1,371,872 912,183 1,814,520 1,812,826 9,191,480 Options Exercisable Weighted Average Exercise Price 38.26 42.88 46.38 51.96 69.47 93.56 60.71 Number 1,170,022 1,067,346 788,169 912,183 574,542 1,812,826 6,325,088 Information for all employee and Director share-based compensation plans is summarized below: Stock Options PSUs RSUs DSUs SARs Units Granted in 2019 Units Outstanding as at December 31, 2019 1,376,533 719,330 425,082 50,958 – 9,191,480 1,834,984 986,756 434,093 1,750,169 Compensation Expense (Recovery) 2019 19 65 18 2 – 104 2018 23 83 14 – (4) 116 Note 7 Other Expenses Merger and related costs Acquisition and integration related costs Foreign exchange loss (gain), net of related derivatives Earnings of equity-accounted investees Bad debts Defined Benefit Plans Curtailment Gain (Note 23) Other expenses 2019 82 16 42 (66) 24 – 56 154 2018 170 – (10) (40) 26 (157) 54 43 92 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 8 Finance Costs Interest expense Short-term debt Long-term debt Lease liabilities (Note 21) Unwinding of discount on asset retirement obligations (Note 24) Interest on net defined benefit pension and other post-retirement plan obligations (Note 23) Borrowing costs capitalized to property, plant and equipment Interest income 2019 2018 87 387 34 54 15 (18) (5) 554 129 372 – 51 15 (12) (17) 538 Borrowing costs capitalized to property, plant and equipment in 2019 were calculated by applying an average capitalization rate of 4.6 percent (2018 – 4.4 percent) to expenditures on qualifying assets. Note 9 Income Taxes Accounting Policies, Estimates and Judgments We operate in a specialized industry and in several tax jurisdictions. As a result, our earnings are subject to various rates of taxation. Taxation on items recognized in the consolidated statements of earnings, other comprehensive income (“OCI”) or contributed surplus is recognized in the same location as those items. Taxation on earnings (loss) is comprised of current and deferred income tax. Current income tax is Deferred income tax is (cid:129) the expected tax payable on the taxable earnings for the year, (cid:129) recognized using the liability method, (cid:129) calculated using rates enacted or substantively enacted at the (cid:129) based on temporary differences between carrying amounts dates of the consolidated balance sheets in the countries where our subsidiaries and equity-accounted investees operate and generate taxable earnings, and (cid:129) inclusive of any adjustment to income tax payable or recoverable in respect of previous years. of assets and liabilities and their respective income tax bases, and (cid:129) determined using tax rates that have been enacted or substantively enacted by the dates of the consolidated balance sheets and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Uncertain income tax positions are accounted for using the standards applicable to current income tax liabilities and assets (i.e., both liabilities and assets are recorded when probable and measured at the amount expected to be paid to (or recovered from) the taxation authorities using our best estimate of the amount). Deferred income tax is not accounted for (cid:129) with respect to investments in subsidiaries and equity- accounted investees where we are able to control the reversal of the temporary difference and that difference is not expected to reverse in the foreseeable future; and (cid:129) if arising from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. The realized and unrealized excess tax benefits from share- based compensation arrangements are recognized in contributed surplus as current and deferred tax, respectively. Deferred income tax assets are reviewed at each balance sheet date and amended to the extent that it is no longer probable that the related tax benefit will be realized. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 93 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 9 Income Taxes Continued Income tax assets and liabilities are offset when Current income taxes Deferred income taxes (cid:129) we have a legally enforceable right to offset the recognized (cid:129) we have a legally enforceable right to set off current tax amounts 1, and assets against current tax liabilities, and (cid:129) the intention to settle on a net basis or realize the asset and (cid:129) they relate to income taxes levied by the same taxation settle the liability simultaneously. authority on either: 1) the same taxable entity; or 2) different taxable entities intending to settle current tax liabilities and assets on a net basis, or realize assets and settle liabilities simultaneously in each future period. 2 1 For income taxes levied by the same taxation authority and the authority permits us to make or receive a single net payment or receipt. 2 In which significant amounts of deferred tax liabilities or assets expected are to be settled or recovered. Estimates and judgments to determine our taxes are impacted by (cid:129) the breadth of our operations, and (cid:129) global complexity of tax regulations. The final taxes paid, and potential adjustments to tax assets and liabilities, are dependent upon many factors including: (cid:129) negotiations with taxation authorities in various jurisdictions; (cid:129) outcomes of tax litigation; and (cid:129) resolution of disputes arising from federal, provincial, state and local tax audits. Estimates and judgments are used to recognize the amount of deferred tax assets, which includes the probability that future taxable profit will be available to use deductible temporary differences, and could be reduced if projected earnings are not achieved or increased if earnings previously not projected become probable. Supporting Information Income Taxes included in Net Earnings (Loss) from Continuing Operations The provision for income taxes differs from the amount that would have resulted from applying the Canadian statutory income tax rates to earnings (loss) before income taxes as follows: Earnings (loss) before income taxes Canada United States Australia Trinidad Other Canadian federal and provincial statutory income tax rate (%) Income tax at statutory rates Adjusted for the effect of: Impact of foreign tax rates Non-taxable income Production-related deductions Foreign accrual property income Impact of tax rate changes Other Income tax expense (recovery) included in net earnings (loss) from continuing operations 2019 2018 765 315 27 (28) 229 1,308 27 353 (45) (19) (17) 18 16 10 316 (1,195) 619 96 98 258 (124) 27 (33) (58) (10) (15) 15 – 8 (93) 94 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 9 Income Taxes Continued Total income tax expense (recovery), included in net earnings (loss) from continuing operations, was comprised of the following: Current income tax Tax expense for current year Adjustments in respect of prior years Total current income tax expense Deferred income tax Origination and reversal of temporary differences Adjustments in respect of prior years Impact of tax rate changes Other Total deferred income tax expense (recovery) Income tax expense (recovery) included in net earnings (loss) from continuing operations 2019 2018 161 (22) 139 152 9 16 – 177 316 195 (15) 180 (283) 12 – (2) (273) (93) Income Tax Balances Income tax balances within the consolidated balance sheets as at December 31 were comprised of the following: Income Tax Assets and Liabilities Balance Sheet Location 2019 2018 Current income tax assets Current Long-term Deferred income tax assets Total income tax assets Current income tax liabilities Current Non-current Deferred income tax liabilities Total income tax liabilities Receivables (Note 13) Other assets (Note 18) Other assets (Note 18) Payables and accrued charges (Note 22) Other non-current liabilities Deferred income tax liabilities 104 36 249 389 43 44 3,145 3,232 248 36 216 500 47 64 2,907 3,018 In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 95 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 9 Income Taxes Continued Deferred Income Taxes In respect of each type of temporary difference, unused tax loss and unused tax credit, the amounts of deferred tax assets and liabilities recognized in the consolidated balance sheets as at December 31 and the amount of the deferred tax expense (recovery) recognized in net earnings (loss) from continuing operations were: Deferred Income Tax (Assets) Liabilities Deferred Income Tax Expense (Recovery) Recognized in Net Earnings (Loss) 2019 2018 2019 2018 Deferred income tax assets Asset retirement obligations and accrued environmental costs Tax loss and other carryforwards Pension and other post-retirement benefit liabilities Long-term debt Lease liabilities Receivables Inventories Derivatives Other assets Deferred income tax liabilities Property, plant and equipment Goodwill and other intangible assets Other liabilities Reconciliation of net deferred income tax liabilities: (387) (270) (145) (107) (227) (51) (59) (9) (61) 3,647 523 42 2,896 (412) (261) (130) (110) – (58) (54) (17) (57) 3,218 546 26 2,691 Balance – beginning of year Merger and acquisitions (Note 4) Income tax expense (recovery) recognized in net earnings (loss) from continuing operations Income tax expense (recovery) recognized in net earnings (loss) from discontinued operations Income tax charge recognized in OCI Other Balance – end of year Amounts and expiry dates of unused tax losses and unused tax credits as at December 31, 2019 were: 25 (9) (13) 3 55 7 (5) 5 4 147 (58) 16 177 2019 2,691 29 177 – 2 (3) 2,896 11 (198) 44 10 – (3) (13) 15 18 (132) (31) 6 (273) 2018 2,187 776 (273) (17) 22 (4) 2,691 Unused operating losses Unused capital losses Unused investment tax credits The unused tax losses and credits with no expiry dates can be carried forward indefinitely. As at December 31, 2019, we had $965 of tax losses for which we did not recognize deferred tax assets. We have determined that it is probable that all recognized deferred tax assets will be realized through a combination of future reversals of temporary differences and taxable income. Amount Expiry Date 1,027 829 38 2020 - Indefinite Indefinite 2020 - 2038 The aggregate amount of temporary differences associated with investments in subsidiaries and equity-accounted investees, for which deferred tax liabilities have not been recognized, as at December 31, 2019 was $9,183 (2018 – $8,710). 96 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 10 Discontinued Operations Accounting Policies Discontinued operations represent a component of our business that either has been disposed of, or is classified as held for sale, and represents a separate major line of business or geographic area of operations or is a part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations. Our significant policies include: (cid:129) cessation of equity accounting for associates and joint ventures at the date the investments were classified as held for sale; (cid:129) measurement of assets at the lower of carrying amount and fair value less costs to sell, with the exception of financial assets measured at fair value through other comprehensive income (“FVTOCI”); and (cid:129) dividends received are recorded on the consolidated statements of earnings. Supporting Information In 2018, our investments in SQM, Israel Chemicals Ltd. (“ICL”) and APC were presented as discontinued operations due to regulatory requirements to dispose of these investments in connection with the Merger. As of December 31, 2018, we completed all required divestitures and retained no residual interests as outlined below: For the year ended December 31, 2018 Shares in SQM Shares in ICL Shares in APC Conda Phosphate operations Total sale 1 Proceeds are net of commissions. 2 Proceeds of $39 were collected in 2019. Proceeds 1 Gain (Loss) on Sale Gain (Loss) on Sale Net of Income Taxes 5,126 685 501 98 6,410 2 4,278 (19) 121 – 4,380 3,366 (19) 126 – 3,473 Net Earnings and Retained Earnings 3,366 – 126 – 3,492 AOCI – (19) – – (19) Net earnings from discontinued operations for the year ended December 31 were as follows: Gain on disposal of investments in SQM and APC Dividend income of SQM, APC and ICL 1 Income tax expense 2 Net earnings from discontinued operations 2018 4,399 156 (951) 3,604 1 Dividend income is included in cash provided by operating activities on the consolidated statements of cash flows, net of tax of $26. 2 For 2018, income tax expense is comprised of $(912) relating to the disposals of SQM shares, including the repatriation of the net proceeds, and $(39) relating to earnings from discontinued operations ($(18) for the planned repatriation of the remaining excess cash available in Chile, $(26) for the repatriation of dividend income received from SQM and $5 relating to APC). Note 11 Net Earnings Per share Weighted average number of common shares Dilutive effect of stock options Dilutive effect of share-settled PSUs Weighted average number of diluted common shares 2019 2018 582,269,000 777,000 56,000 624,900,000 – 1 – 1 583,102,000 624,900,000 1 The diluted weighted average share calculations excluded an additional 658,000stock options and 137,000equity-settled PSUs due to their anti-dilutive effect. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 97 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 11 Net Earnings Per share Continued Options excluded from the calculation of diluted net earnings per share due to the option exercise prices being greater than the average market price of common shares were as follows: Number of options excluded Performance option plan years fully excluded Stock option plan years fully excluded 2019 2018 4,539,529 2010 – 2015 2015, 2019 5,721,656 2009 – 2015 2015, 2018 Note 12 Financial Instruments and Related Risk Management Accounting Policies Financial instruments are classified and measured as follows: Fair Value Through Profit or Loss (“FVTPL”) Fair Value Through Other Comprehensive Income (“FVTOCI”) Instrument type Cash and cash equivalents and derivatives Equity investments not held for trading Measurement Fair value Fair value gains and losses Profit or loss Interest and dividends Profit or loss Impairment of assets – Foreign exchange Transaction costs Profit or loss Profit or loss Fair value OCI 2 Profit or loss – OCI OCI Financial Assets and Liabilities at Amortized Cost 1 Receivables, short-term debt, payables and accrued charges, long-term debt, other long- term debt instruments Amortized cost – Profit or loss: effective interest rate Profit or loss Profit or loss Included in cost of instrument 1 Amortized cost is applied if the objective of the business model for the instrument or group of instruments is to hold the asset to collect the contractual cash flows and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest. 2 For equity investments not held for trading, we may make an irrevocable election at initial recognition to recognize changes in fair value through OCI rather than profit or loss. Financial instruments are recognized at trade date when we commit to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flow from the investments have expired or we have transferred them, and all the risks and rewards of ownership have been substantially transferred. Derivatives are used to lock in commodity prices and exchange rates. For designated and qualified cash flow hedges: (cid:129) the effective portion of the change in the fair value of the derivative is accumulated in OCI; (cid:129) when the hedged forecast transaction occurs, the related gain or loss is removed from AOCI and included in the cost of inventory; (cid:129) the hedging gain or loss included in the cost of inventory is recognized in earnings when the product containing the hedged item is sold or becomes impaired; and (cid:129) the ineffective portions of hedges are recorded in net earnings in the current period. We also assess whether the natural gas swaps used in hedging transactions are expected to be or were highly effective, both at the hedge’s inception and on an ongoing basis, in offsetting changes in fair values of hedged items. Hedge effectiveness related to our New York Mercantile Exchange (“NYMEX”) natural gas hedges is assessed on a prospective and retrospective basis using regression analyses. In 2018, our Alberta Energy Company (“AECO”) natural gas hedges were assessed using a qualitative assessment. Potential sources of ineffectiveness are changes in timing of forecast transactions, changes in volume delivered or changes in our credit risk or the counterparty. 98 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 12 Financial Instruments and Related Risk Management Continued Net investment hedges relating to the commitment to purchase a foreign operation: (cid:129) are considered a non-financial item and are accounted for similar to a cash flow hedge; and (cid:129) the gain or loss from the hedging instrument is deferred in OCI and subsequently recorded as an adjustment to goodwill when the business combination occurs. Financial assets and financial liabilities are offset and the net amount is presented in the consolidated balance sheets when we: (cid:129) currently have a legally enforceable right to offset the recognized amounts; and (cid:129) intend either to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. Supporting Information Credit Risk Our exposure to credit risk on our cash and cash equivalents, receivables (excluding taxes) and derivative instrument assets is the carrying amount of each instrument on the consolidated balance sheets. Maximum exposure to credit risk as at December 31: Cash and cash equivalents Receivables 1 Other current assets – derivatives 1 Excluding income tax receivable. 2019 671 3,438 5 4,114 2018 2,314 3,094 5 5,413 Credit risk is managed through policies applicable to the following assets: Acceptable Minimum Counterparty Credit Ratings Exposure Thresholds by Counterparty Daily Counterparty Settlement Based on Prescribed Credit Thresholds Counterparties to Contracts are Investment-Grade Quality Cash and Cash Equivalents Natural Gas Derivatives Foreign Currency Derivatives X X X We manage our credit risk on receivables from customers through a credit management program whereby: (cid:129) credit approval policies and procedures are in place to guide the granting of credit to new customers as well as our continued extension to existing customers; (cid:129) existing customer accounts are reviewed every 12-24 months, depending on the credit limit amounts; (cid:129) credit is extended to international customers based upon an evaluation of both customer and country risk; (cid:129) the credit period on sales is generally 15 and 30 days for wholesale fertilizer customers, 30 days for industrial and feed customers, 30-90 days for Retail customers and up to 180 days for select export sales customers; and (cid:129) credit agency reports, where available, and an assessment of other relevant information such as current financial statements and/or credit references, are used before assigning credit limits to customers. We may transact with customers that fail to meet specified benchmark creditworthiness on a cash basis or provide other evidence of ability to pay. X X X In our Retail operations in Western Canada, credit risk in accounts receivable is mitigated through an agency agreement with a Canadian financial institution wherein the financial institution provides credit to qualifying customers to assist in financing their crop input purchases. Through the agency agreement, which expires in 2021, customers have financing arrangements directly with the financial institution while we have only a limited recourse involvement to the extent of an indemnification of the financial institution for 54 percent (2018 – 52 percent) of its future bad debts to a maximum of 3 percent (2018 – 5 percent) of the qualified customer loans. Outstanding customer credit with the financial institution was $521 at December 31, 2019, which is not recognized in our consolidated balance sheets. Historical indemnification losses on this arrangement have been negligible, and the average aging of the customer loans with the financial institution is current. Our receivables from customers also include a concentration in Retail operations in Australia for advances to customers to purchase crop inputs and livestock. We mitigate risk in these receivables by obtaining security over livestock and crop. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 99 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 12 Financial Instruments and Related Risk Management Continued Liquidity Risk Liquidity risk arises from our general funding needs and the management of our assets, liabilities and optimal capital structure. We manage our liquidity risk to maintain sufficient liquid financial resources to fund our operations and meet our commitments and obligations in a cost-effective manner. In managing our liquidity risk, we have access to a range of funding options and have established an external borrowing policy with the following objectives: (cid:129) maintain an optimal capital structure; (cid:129) maintain investment-grade credit ratings that provide ease of access to the debt capital and commercial paper markets; (cid:129) maintain sufficient short-term credit availability; and (cid:129) maintain long-term relationships with a sufficient number of high-quality and diverse lenders. The table below outlines our available credit facilities as at December 31, 2019: Unsecured revolving term credit facility 1 Uncommitted revolving demand facility Other credit facilities Total Amount 4,500 500 820 Amount Outstanding and Committed Amount Available 650 – 326 3,850 500 494 1 The unsecured revolving term credit facility matures April 10, 2023, subject to extension at the request of Nutrien provided that the resulting maturity date shall not exceed five years from the date of request. The following maturity analysis of our financial liabilities and gross settled derivative contracts (for which the cash flows are settled simultaneously) is based on the expected undiscounted contractual cash flows from the date of the consolidated balance sheets to the contractual maturity date. 2019 Short-term debt 1 Payables and accrued charges 2 Long-term debt, including current portion 1 Lease liabilities, including current portion 1 Derivatives Carrying Amount of Liability as at December 31 Contractual Cash Flows Within 1 Year 976 5,264 9,055 1,073 33 16,401 976 5,264 14,392 1,302 33 21,967 976 5,264 894 249 14 7,397 1 to 3 Years – – 1,268 364 10 1,642 3 to 5 Years – – 1,923 234 9 2,166 Over 5 Years – – 10,307 455 – 10,762 1 Contractual cash flows include contractual interest payments related to debt obligations and lease liabilities. Interest rates on variable rate debt are based on prevailing rates as at December 31, 2019. 2 Excludes non-financial liabilities and includes trade payables of approximately $1.4 billion paid in January and February 2020 through an arrangement whereby a supplier sold the right to receive payment to a financial institution. 100 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 12 Financial Instruments and Related Risk Management Continued Foreign Exchange Risk To manage foreign exchange risk (primarily related to our foreign operations), we may enter into foreign currency derivatives. Treasury risk management policies allow such exposures to be hedged within certain prescribed limits for both forecast operating and capital expenditures. The risk management policy is to manage the earnings impact that could occur from a reasonably possible strengthening or weakening of the US dollar. The foreign currency derivatives are not currently designated as hedging instruments for accounting purposes. The following table presents the significant foreign currency derivatives that existed at December 31: Sell/buy Forwards USD/CDN CDN/USD USD/AUD 1 AUD/USD 1 Australian Dollar 2019 2018 Notional Maturities 337 120 78 47 2020 2020 2020 2020 Average contract rate 1.3096 1.3138 1.4593 1.4563 Notional Maturities 502 205 40 48 2019 2019 2019 2019 Average contract rate 1.3583 1.3636 1.3777 1.3816 Interest Rate Risk Fluctuations in interest rates impact the future cash flows and fair values of various financial instruments. Interest rate risk on debt is addressed by: (cid:129) using a portfolio of fixed and floating rate instruments; (cid:129) aligning current and long-term assets with demand and fixed-term debt; (cid:129) monitoring the effects of market changes in interest rates; and (cid:129) using interest rate swaps, if desired. Related to interest rate risk on investments in marketable securities, our primary objectives are to: (cid:129) ensure the security of principal amounts invested; (cid:129) provide for an adequate degree of liquidity; and (cid:129) achieve a satisfactory return. Treasury risk management policies specify investment parameters including eligible types of investment, maximum maturity dates, maximum exposure by counterparty and minimum credit ratings. We have credit facilities in Argentina that are subject to floating interest rates. We do not believe we have material exposure to interest rate risk on our financial instruments and earnings as at December 31, 2019 and 2018. Price Risk Commodity price risk exists on our natural gas derivative instruments. Our natural gas strategy is to diversify our forecast gas volume requirements, including a portion of annual requirements purchased at spot market prices, a portion at fixed prices (up to 10 years) and a portion indexed to the market price of ammonia. Our objective is to acquire a reliable supply of natural gas feedstock and fuel on a location- adjusted, cost-competitive basis. Price risk also exists for exchange-traded equity securities measured at FVTPL or FVTOCI. We had no material exposure to price risk on our financial instruments as at December 31, 2019 and 2018. Fair Value Estimated fair values for financial instruments are designed to approximate amounts for which the instruments could be exchanged in a current arm’s-length transaction between knowledgeable, willing parties. The valuation policies and procedures for financial reporting purposes are determined by our finance department. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 101 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 12 Financial Instruments and Related Risk Management Continued Financial instruments included in the consolidated balance sheets are measured either at fair value or amortized cost. The tables below explain the valuation methods used to determine the fair value of each financial instrument and its associated level in the fair value hierarchy. Financial Instruments Measured at Fair Value Fair Value Method Cash and cash equivalents Equity securities Debt securities Foreign currency derivatives not traded in an active market Carrying amount (approximation to fair value assumed due to short-term nature) Closing bid price of the common shares as at the balance sheet date Closing bid price of the debt or other instruments with similar terms and credit risk (Level 2) as at the balance sheet date Quoted forward exchange rates (Level 2) as at the balance sheet date Foreign exchange forward contracts, swaps and options and natural gas swaps not traded in an active market A discounted cash flow model 1 Market comparison 2 1 Inputs included contractual cash flows based on prices for natural gas futures contracts, fixed prices and notional volumes specified by the swap contracts, the time value of money, liquidity risk, our own credit risk (related to instruments in a liability position) and counterparty credit risk (related to instruments in an asset position). Futures contract prices used as inputs in the model were supported by prices quoted in an active market and therefore categorized in Level 2. 2 Inputs include current market and contractual prices, forward pricing curves, quoted forward prices, basis differentials, volatility factors and interest rates and therefore categorized in Level 2. Market comparison was used for the 2018 AECO natural gas hedges. Financial Instruments Measured at Amortized Cost Fair Value Method Receivables, short-term debt and payables and accrued charges Long-term debt Carrying amount (approximation to fair value assumed due to short-term nature) Quoted market prices (Level 1 or 2 depending on the market liquidity of the debt) Other long-term debt instruments Carrying amount The following table presents our fair value hierarchy for financial assets and financial liabilities carried at fair value on a recurring basis or measured at amortized cost: Financial instruments measured at Fair value on a recurring basis Cash and cash equivalents Derivative instrument assets Other current financial assets – marketable securities 2 Investments at FVTOCI (Note 17) Derivative instrument liabilities Amortized cost Current portion of long-term debt Notes and debentures Fixed and floating rate debt Long-term debt Notes and debentures Fixed and floating rate debt 2019 2018 Carrying Amount Level 1 1 Level 2 1 Carrying Amount Level 1 1 Level 2 1 671 5 193 161 (33) (494) (8) – – 27 161 – 671 5 166 – (33) 2,314 5 97 186 (71) – – (503) (8) (995) (8) – – 12 186 – – – (8,528) (25) (1,726) – (7,440) (25) (7,569) (22) (1,004) – 2,314 5 85 – (71) (1,009) (8) (6,177) (22) 1 Financial instruments included in Level 1 are measured using quoted prices in active markets for identical assets or liabilities, while those classified as Level 2 are measured using significant other observable inputs. During 2019 and 2018, there were no transfers between Level 1 and Level 2 for financial instruments measured at fair value on a recurring basis. Our policy is to recognize transfers at the end of the reporting period. 2 Marketable securities consist of equity and fixed income securities. 102 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 12 Financial Instruments and Related Risk Management Continued Financial assets (liabilities) Gross Offset Net Amounts Presented Gross Offset Net Amounts Presented 2019 2018 Derivative instrument assets Natural gas derivatives Derivative instrument liabilities Natural gas derivatives 1 Other long-term debt instruments 2 – (30) (150) (180) – – 150 150 – (30) – (30) 31 (27) (92) (150) (211) 26 150 149 4 (66) – (62) 1 Cash margin deposits of $17 (2018 – $18) were placed with counterparties related to legally enforceable master netting arrangements. 2 Back-to-back loan arrangements that are not subject to any financial test covenants but are subject to certain customary covenants and events of default. We were in compliance with these covenants as at December 31, 2019. Natural gas derivatives outstanding: 2019 2018 Notional 1 Maturities Average Contract Price 2 Fair Value of Assets (Liabilities) Notional 1 Maturities Average Contract Price 2 Fair Value of Assets (Liabilities) NYMEX swaps AECO swaps 16 – 2020 – 2022 n/a 4.26 – (30) – 22 26 2019 – 2022 2019 4.26 1.92 (35) (25) 1 In millions of British thermal units (“MMBtu”). 2 US dollars per MMBtu. n/a = not applicable Note 13 Receivables Accounting Policies, Estimates and Judgments Receivables from customers are recognized initially at fair value and subsequently measured at amortized cost less allowance for expected credit losses of receivables from customers. We estimate losses on receivables based on known troubled accounts and historical experience of losses incurred using the lifetime expected credit loss method, which represents the expected credit loss that will result from all possible default events over the expected life of a financial instrument. To determine the expected credit losses, receivables from customers have been grouped based on geography, days past due and/or customer credit risk profile. Receivables are considered to be in default and are written off against the allowance when it is probable that all remaining contractual payments due will not be collected in accordance with the terms of the agreement. Subsequent recoveries of amounts previously written off are credited to the consolidated statements of earnings. Vendors may offer various incentives to purchase products for resale. Vendor rebates and prepay discounts are accounted for as a reduction of the prices of the suppliers’ products. Rebates based on the amount of materials purchased reduce cost of goods sold as inventory is sold. Rebates earned based on sales volumes of products are offset to cost of goods sold. Rebates that are probable and can be reasonably estimated are accrued. Rebates that are not probable or estimable are accrued when certain milestones are achieved. Determining when there is no reasonable expectation of recovering the amounts requires judgment. Estimation of rebates can be complex in nature as vendor arrangements are diverse. The amount of the accrual is determined by analyzing and reviewing historical trends to apply negotiated rates to estimated and actual purchase volumes. Estimated amounts accrued throughout the year could also be impacted if actual purchase volumes differ from projected volumes. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 103 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 13 Receivables Continued Supporting Information Receivables from customers – third parties – Canpotex (Note 29) Less allowance for expected credit losses of receivables from customers Rebates Income taxes (Note 9) Other receivables Note 14 Inventories Accounting Policies, Estimates and Judgments 2019 2,936 194 (83) 3,047 190 104 201 3,542 2018 2,628 208 (90) 2,746 169 248 179 3,342 Inventories are valued monthly at the lower of cost and net realizable value. Costs are allocated to inventory using the weighted average cost method and include: direct acquisition costs, direct costs related to units of production and a systematic allocation of fixed and variable production overhead, as applicable. Net realizable value is based on Products and raw materials Materials and supplies (cid:129) selling price of the finished product (in ordinary course of (cid:129) replacement cost. business) less the estimated costs of completion and estimated costs to make the sale. A writedown is recognized if the carrying amount exceeds net realizable value and may be reversed if the circumstances which caused it no longer exist. Various factors impact our estimates of net realizable value, including inventory levels, forecasted prices of key production inputs, global nutrient capacities, and crop price trends. Supporting Information Product purchased for resale 1 Finished products Intermediate products Raw materials Materials and supplies 2019 3,592 524 244 205 410 4,975 2018 3,545 501 218 275 378 4,917 1 Includes biological assets of $33 (December 31, 2018 – $2) measured at fair value less cost of disposal. Inventories expensed to cost of goods sold during the year were $13,465 (2018 – $13,083). 104 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 15 Property, Plant and Equipment The majority of our tangible assets are the buildings, machinery and equipment used to produce or distribute our products and render our services. Accounting Policies, Estimates and Judgments Owned Property, Plant and Equipment Property, plant and equipment are carried at cost less accumulated depreciation and any recognized impairment loss. Cost includes all expenditures directly attributable to bringing the asset to the location and installing it in working condition for its intended use, including: (cid:129) additions to, and betterments and renewals of, existing assets; (cid:129) borrowing costs incurred during construction using a capitalization rate based on the weighted average interest rate of our outstanding debt; and (cid:129) a reduction for income derived from the asset during construction. Each component of an item of property, plant and equipment with a cost that is significant in relation to the item’s total cost is depreciated separately. When the cost of replacing part of an item of property, plant and equipment is capitalized, the carrying amount of the replaced part is derecognized. The cost of major inspections and overhauls is capitalized and depreciated over the period until the next major inspection or overhaul. Maintenance and repair expenditures that do not improve or extend productive life are expensed in the period incurred. Environmental costs related to current operations are also capitalized if: (cid:129) property life is extended, (cid:129) capacity is increased, (cid:129) contamination from future operations is mitigated or prevented, or (cid:129) the expenditure is related to legal or constructive asset retirement obligations. Judgment involves determining: (cid:129) costs, including income or expenses derived from an asset under construction, that are eligible for capitalization; (cid:129) timing to cease cost capitalization, generally when the asset is capable of operating in the manner intended by management, but also considering the circumstances and the industry in which the asset is to be operated, normally predetermined by management with reference to such factors as productive capacity; (cid:129) the appropriate level of componentization (for individual components for which different depreciation methods or rates are appropriate); (cid:129) repairs and maintenance that qualify as major inspections and overhauls; and (cid:129) useful life over which such costs should be depreciated. Certain property, plant and equipment directly related to the Potash, Nitrogen and Phosphate segments are depreciated using the units-of-production method based on the shorter of estimates of reserves or service lives. Pre-stripping costs are depreciated on a units-of-production basis over the ore mined from the mineable acreage stripped. Land is not depreciated. The remaining assets are depreciated on a straight-line basis. Estimated useful lives, expected patterns of consumption, depreciation method and residual values are reviewed at least annually with the effect of any changes in estimate being accounted for on a prospective basis. Uncertainties are inherent in estimating reserve quantities, particularly as they relate to assumptions regarding future prices, the geology of our mines, the mining methods used, and the related costs incurred to develop and mine reserves. Changes in these assumptions could result in material adjustments to reserve estimates, which could result in impairments or changes to depreciation expense in future periods. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 105 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 15 Property, Plant and Equipment Continued Leased Property, Plant and Equipment A contract is a lease or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases are recognized as right-of-use (“ROU”) assets and corresponding liabilities at the date at which a leased asset is available for use. Lease payments are allocated between finance costs, calculated using the effective interest method, and a reduction of the liability. ROU assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Our major categories of assets leased are: (cid:129) railcars and marine vessels used to transport product to customers; (cid:129) real estate used as office space, storage and distribution; and (cid:129) mobile equipment primarily used to deliver and apply product and to meet with customers. Railcars are utilized in North America and include general service and high-pressure tank cars and general-purpose hopper cars. Railcars are sourced from multiple suppliers and terms vary by lease agreement. For railcars required in our operations, we have a history of renegotiating new leases at termination of existing leases. Marine vessels include ocean- going vessels used to transport ammonia from our nitrogen facilities in Trinidad to our customers. We lease real estate across our operations consisting of office space and product storage and distribution sites. Real estate leases have varying terms by location and use of the property, and are normally renewable at market rates. Most storage and distribution leases do not convey a right to use a specific identified space and accordingly these are not classified as leases under IFRS 16 and are expensed as incurred. Our Retail segment leases a fleet of motor vehicles and product application equipment and other transportation equipment. Motor vehicle leases primarily have a 50-month initial term and are renewable annually thereafter. We expect to renew all our Retail motor vehicle leases for substantially all of the useful life of the equipment. We seek to maximize operational flexibility in managing our leasing activities by including extension options when negotiating new leases. Extension options are exercisable at our option and not by the lessors. In determining if a renewal period should be included in the lease term, we consider all relevant factors that create an economic incentive for us to exercise a renewal, including the location of the asset, the availability of suitable alternatives, the significance of the asset to operations, and our business strategy. Lease agreements do not contain significant covenants; however, leased assets may be used as security for lease liabilities and other borrowings. ROU assets are measured at cost, less any impairments, including: (cid:129) the initial measurement of lease liability (see Note 21); (cid:129) any lease payments made at or before the commencement date less any lease incentives received; (cid:129) any initial direct costs; and (cid:129) an estimate of costs, if any, to be incurred by us in restoring the underlying asset to the condition required by the terms and conditions of the lease. Liabilities arising from a lease are initially measured as the net present value of the future lease payments, including: (cid:129) fixed payments (including in-substance fixed payments), less any lease incentives; (cid:129) variable lease payments that are based on an index or a rate; (cid:129) amounts expected to be payable under residual value guarantees; (cid:129) the exercise price of a purchase option if we are reasonably certain to exercise that option; and (cid:129) payments of penalties for terminating the lease, if the lease term reflects us exercising that option. In recording ROU assets and related liabilities at inception of a lease, lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, an incremental borrowing rate is used, being a rate that we would have to pay to borrow the funds required to obtain a similar asset, adjusted for term, security, asset value and the borrower’s economic environment. The carrying amount of ROU assets and lease liabilities is remeasured if there is a modification of the lease, a change in the lease term, a change in the in-substance fixed lease payments, a change in the expected amount under a residual value guarantee or a change in the assessment to exercise a purchase, extension or termination option. Payments for short-term leases and leases of low-value assets are expensed on a straight-line basis. Short-term leases are leases with a lease term of 12 months or less that do not contain a purchase option. Low-value assets generally comprise IT equipment and office furniture. Judgment is required to determine whether a contract or arrangement includes a lease and if it is reasonably certain that an extension option will be exercised. Estimation is used to determine the useful lives of ROU assets, the lease term and the appropriate discount rate applied to the lease payments to calculate the lease liability. Refer to Note 31 for impacts of the adoption of IFRS 16. Accounting policies, estimates and judgments related to impairment of long-lived assets are described in Note 31. 106 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 15 Property, Plant and Equipment Continued Supporting Information Land and Improvements Buildings and Improvements Machinery and Equipment Mine Development Costs Assets Under Construction Total Useful life range (years) Carrying amount – December 31, 2018 ROU assets recognized on adoption of IFRS 16 Acquisitions (Note 4) Additions Additions – ROU Disposals Transfers Foreign currency translation and other Depreciation Depreciation – ROU Impairment 3 – 80 1,018 1 – 60 6,044 48 17 14 – (3) 108 (4) (36) (2) – 307 136 30 22 (5) 145 (37) (187) (46) – 1 – 80 9,882 704 61 225 177 (84) 932 (14) (1,004) (186) (52) Carrying amount – December 31, 2019 1,160 6,409 10,641 n/a 709 – – – – – 110 5 (77) – – 747 n/a 1,143 – 37 1,487 – – (1,295) 6 – – – 1,378 18,796 1,059 251 1,756 199 (92) – (44) (1,304) (234) (52) 20,335 Balance – December 31, 2019 comprised of: Cost Accumulated depreciation and impairments Carrying amount – December 31, 2019 Balance – December 31, 2019 comprised of: Owned property, plant and equipment ROU assets Carrying amount – December 31, 2019 Carrying amount – December 31, 2017 Merger impact (Note 4) Other acquisitions Additions Disposals Transfers Foreign currency translation and other Depreciation Impairment 1,474 8,207 18,548 2,068 1,378 31,675 (314) 1,160 (1,798) 6,409 (7,907) (1,321) – (11,340) 10,641 747 1,378 20,335 1,117 43 1,160 612 396 10 41 (3) 10 (9) (33) (6) 6,065 344 6,409 4,184 2,695 31 61 (14) 30 28 (195) (776) 6,044 9,973 668 10,641 6,744 4,042 66 327 (30) 538 (21) (1,032) (752) 9,882 747 – 747 979 – – 42 – 18 10 (65) (275) 709 1,378 – 1,378 452 326 – 975 – (596) (14) – – 1,143 19,280 1,055 20,335 12,971 7,459 107 1,446 (47) – (6) (1,325) (1,809) 18,796 Carrying amount – December 31, 2018 1,018 Balance – December 31, 2018 comprised of: Cost Accumulated depreciation and impairments Carrying amount – December 31, 2018 1,294 7,617 16,806 1,954 1,143 28,814 (276) 1,018 (1,573) 6,044 (6,924) (1,245) – (10,018) 9,882 709 1,143 18,796 In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 107 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 15 Property, Plant and Equipment Continued Depreciation of property, plant and equipment was included in the following: Freight, transportation and distribution Cost of goods sold Selling expenses General and administrative expenses Depreciation recorded in inventory 2019 137 1,008 344 40 1,529 161 1,690 2018 15 1,016 259 35 1,325 108 1,433 After a strategic portfolio review was completed in 2018, we determined the New Brunswick Potash operations would no longer be part of our medium-term or long-term strategic plans. The decision was considered a significant change in the expected manner of use and the related assets were moved from the Potash cash-generating unit (“CGU”) to the New Brunswick CGU, which was then assessed for impairment. The estimated recoverable amount of the New Brunswick CGU, based on fair value less costs of disposal (“FVLCD”), was $50 resulting in an impairment loss of $1,809 ($1,320 net of tax) being recorded in the Potash segment. The estimated recoverable amount was determined to be the salvage value of the assets based on the estimated fair market value of similar used assets and past experience, a Level 3 fair value measurement. There were no reversals of impairment in 2019 or 2018. 108 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 16 Goodwill and Other Intangible Assets Accounting Policies, Estimates and Judgments Goodwill is carried at cost, is not amortized, and represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Other intangible assets are generally measured at cost less accumulated amortization and any accumulated impairment losses. Goodwill is allocated to CGUs or groups of CGUs for impairment testing based on the level at which it is monitored by management, and not at a level higher than an operating segment. The allocation is made to those CGUs or groups of CGUs expected to benefit from the business combination in which the goodwill arose. Judgment is applied in determining when expenditures are eligible for capitalization as intangible assets. Estimation is applied to determine expected useful lives used in the straight-line amortization of intangible assets with finite lives. Useful lives are reviewed, and adjusted if appropriate, at least annually. Supporting Information Goodwill Customer Relationships 2 Technology Trade Names Other Total Other Intangibles Useful life range (years) Carrying amount – December 31, 2018 Acquisitions (Note 4) Additions – internally developed Foreign currency translation and other Impairment Amortization 1 Carrying amount – December 31, 2019 Balance – December 31, 2019 comprised of: n/a 11,431 543 – 12 – – 11,986 3 – 15 1,554 173 – 2 – (145) 1,584 Cost Accumulated amortization and impairment Carrying amount – December 31, 2019 Carrying amount – December 31, 2017 Merger impact (Note 4) Other acquisitions (Note 4) Additions – internally developed Disposals Foreign currency translation and other Amortization 1 Carrying amount – December 31, 2018 Balance – December 31, 2018 comprised of: Cost Accumulated amortization Carrying amount – December 31, 2018 11,993 1,906 (7) 11,986 97 11,185 197 – – (48) – 11,431 11,438 (7) 11,431 (322) 1,584 – 1,708 1 – – (20) (135) 1,554 1,691 (137) 1,554 3 – 30 10 – 20 3 1 – 20 117 43 197 9 – (15) 351 429 (78) 351 – 44 – 79 – 1 (7) 117 124 (7) 117 90 13 – 18 (35) (24) 62 449 115 2 (25) (33) (77) 431 2,210 344 199 4 (68) (261) 2,428 92 597 3,024 (30) 62 – 122 – – – (4) (28) 90 118 (28) 90 (166) 431 69 474 7 19 (27) (6) (87) 449 586 (137) 449 (596) 2,428 69 2,348 8 98 (27) (29) (257) 2,210 2,519 (309) 2,210 1 Amortization of $234 was included in selling expenses during the year ended December 31, 2019 (2018 – $225). 2 The remaining amortization period of customer relationships at December 31, 2019, was approximately 7 years. 3 Certain trade names have indefinite useful lives as there are no regulatory, legal, contractual, cooperative, economic or other factors that limit their useful lives. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 109 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 16 Goodwill and Other Intangible Assets Continued Goodwill Impairment Testing We performed our annual impairment test on goodwill during the fourth quarter and did not identify any impairment, however the recoverable amount for Retail – North America did not substantially exceed its carrying amount. In testing for impairment of goodwill, we calculate the recoverable amount for groups of CGUs containing goodwill. We used the FVLCD methodology based on after-tax discounted cash flows (five-year projections and a terminal year thereafter) and incorporated assumptions an independent market participant would apply. We adjusted discount rates for each group of CGUs for the risk associated with achieving our forecasts (five-year projections) and for the currency in which we expect to generate cash flows. FVLCD is a Level 3 measurement. We use our market capitalization and comparative market multiples to corroborate discounted cash flow results. The key assumptions with the greatest influence on the calculation of the recoverable amounts are the discount rates, terminal growth rates and cash flow forecasts. The key forecast assumptions were based on historical data and estimates of future results from internal sources as well as industry and market trends. For each group of CGUs, terminal growth rates and discount rates used were as follows: Retail – North America Retail – International 1 Potash Nitrogen Terminal Growth Rate (%) Discount Rate (%) 2.5 2.0 2.5 2.0 7.0 7.5 - 15.0 8.0 9.0 1 The discount rates reflect the country risk premium and size for our international groups of CGUs. 110 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 16 Goodwill and Other Intangible Assets Continued The Retail – North America group of CGUs recoverable amount exceeds its carrying amount by $794 which is 6% of the recoverable amount. As a result of the Merger, the non-cash fair value adjustment to the Retail — North America goodwill was $4,284. Goodwill is more susceptible to impairment risk if business operating results or economic conditions deteriorate and we do not meet our forecasts. A reduction in the terminal growth rate, an increase in the discount rate or a decrease in forecasted cash flows could cause material impairment in the future. The following table indicates the percentage by which key assumptions would need to change individually for the estimated Retail — North America recoverable amount to be equal to the carrying amount: Key Assumptions Terminal growth rate Forecasted EBITDA over forecast period Discount rate Note 17 Investments Change Required for Carrying Amount to Equal Recoverable Amount (%) Value Used in Impairment Model (0.3) (4.1) 0.2 2.5% 6,128 7.0% We hold interests in associates and joint ventures, the most significant being Canpotex, MOPCO and Profertil. Our most significant investment accounted for as FVTOCI is Sinofert. Accounting Policies, Estimates and Judgments Investments in Equity-Accounted Investees Investments in which we exercise significant influence (but do not control) or have joint control (as joint ventures) are accounted for using the equity method. Significant influence is the power to participate in the financial and operating policy decisions of the investee, commonly referred to as an associate. We recognize profits on sales to Canpotex when there is a transfer of control, either at the time the product is loaded for shipping or delivered, depending on the terms of the contract. Investments at FVTOCI The fair value of investments designated as FVTOCI is recorded in the consolidated balance sheets, with unrealized gains and losses, net of related income taxes, recorded in AOCI. Our significant policies include the following: (cid:129) the cost of investments sold is based on the weighted average method, and (cid:129) unrealized gains and losses on these investments remain in OCI until the time of sale or disposal when it is transferred to retained earnings. Investments in Equity-Accounted Investees and Investments at FVTOCI We continuously assess our ability to exercise significant influence or joint control over our investments. Our 22 percent ownership in Sinofert does not constitute significant influence as we do not have any representation on the Board of Directors of Sinofert. We have representation on the MOPCO Board of Directors providing significant influence over MOPCO. We recorded our share of MOPCO’s earnings on a one-quarter lag, adjusted for any material transactions for the current quarter, as the financial statements of MOPCO are not available on the date of issuance of our consolidated financial statements. We elected to account for our investment in Sinofert as FVTOCI as it is held for strategic purposes. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 111 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 17 Investments Continued Supporting Information Equity-accounted investees and investments at FVTOCI as at December 31 were comprised of: Principal Place of Business and Incorporation Proportion of Ownership Interest and Voting Rights Held (%) Carrying Amount 2019 2018 2019 2018 Name Principal Activity Equity-accounted investees MOPCO Profertil Canpotex Agrichem 1 Other associates and joint ventures Nitrogen Producer Nitrogen Producer Marketing and Logistics Fertilizer Producer and Marketer Total equity-accounted investees Egypt Argentina Canada Brazil Investments at FVTOCI Sinofert Other Fertilizer Supplier and Distributor China/Bermuda Total investments at FVTOCI 26 50 50 100 22 – 26 50 50 80 22 – 270 212 – – 178 660 161 – 161 236 192 – 103 161 692 180 6 186 1 During 2019, we acquired the remaining 20 percent interest in Agrichem making it a wholly owned consolidated subsidiary, as described in Note 4, and as a result ceased equity accounting. Prior to this acquisition, we had joint control with the other shareholder of Agrichem. Future conditions, including those related to MOPCO and Profertil, are subject to variability due to political instability and civil unrest. We are exposed to foreign exchange risk related to fluctuations in the Egyptian pound and Argentine peso against the US dollar. This may also restrict our ability to obtain dividends from Profertil. Additional financial information on our proportionate interest in equity-accounted investees for the years ended December 31 was as follows: Associates Joint Ventures 2019 2018 2019 2018 Earnings from continuing operations and net earnings Other comprehensive income Total comprehensive income 34 6 40 24 – 24 32 – 32 16 – 16 112 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 18 Other Assets Other assets as at December 31 were comprised of: Deferred income tax assets (Note 9) Ammonia catalysts – net of accumulated amortization of $71 (2018 – $79) Long-term income tax receivable (Note 9) Accrued pension benefit asset (Note 23) Other – net of accumulated amortization of $41 (2018 – $38) Note 19 Short-Term Debt 2019 249 89 36 25 165 564 2018 216 81 36 27 165 525 We use our $4.5 billion commercial paper program for our short-term cash requirements. The commercial paper program is backstopped by the $4.5 billion unsecured revolving term credit facility (“Nutrien Credit Facility”). Short-term facilities are renegotiated periodically. Short-term debt as at December 31 was comprised of: Commercial paper Other credit facilities 1 Rate of Interest (%) 2.0 – 2.1 0.8 – 10.4 2019 650 326 976 2018 391 238 629 1 Credit facilities are unsecured and consist of South American facilities with debt of $149 (2018 – $216) and interest rates ranging from 3.00 percent to 10.38 percent, Australia facilities with debt of $157 (2018 – $Nil) and interest rates ranging from 0.75 percent to 2.09 percent, and Other facilities with debt of $20 (2018 – $22) and interest rates ranging from 1.64 percent to 2.50 percent. The amount available under the commercial paper program is limited to the availability of backup funds under the Nutrien Credit Facility. As at December 31, 2019, we were authorized to issue commercial paper up to $4,500 (2018 – $4,500). Principal covenants and events of default under the Nutrien Credit Facility include a debt to capital ratio of less than or equal to 0.65:1 and other customary events of default and covenant provisions. Non-compliance with such covenants could result in accelerated repayment and/or termination of the credit facility. We were in compliance with all covenants as at December 31, 2019. We also had other facilities available from which we could draw short-term debt, including a $500 uncommitted revolving demand facility and $820 of other facilities mostly denominated in foreign currencies. Our $500 accounts receivable securitization program was terminated in 2019. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 113 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 20 Long-Term Debt We source our borrowings for funding purposes primarily through notes, debentures and long-term credit facilities. We have access to the capital markets through our base shelf prospectus. Supporting Information Long-term debt as at December 31 was comprised of: Notes 1 Rate of Interest (%) Maturity 2019 2018 6.750 6.500 4.875 3.150 3.500 3.625 3.375 3.000 4.000 4.200 4.125 7.125 5.875 5.625 6.125 4.900 5.250 5.000 7.800 January 15, 2019 May 15, 2019 March 30, 2020 October 1, 2022 June 1, 2023 March 15, 2024 March 15, 2025 April 1, 2025 December 15, 2026 April 1, 2029 March 15, 2035 May 23, 2036 December 1, 2036 December 1, 2040 January 15, 2041 June 1, 2043 January 15, 2045 April 1, 2049 February 1, 2027 – – 500 500 500 750 550 500 500 750 450 300 500 500 500 500 500 750 125 33 8,708 424 (77) 9,055 (508) – 6 (502) 8,553 500 500 500 500 500 750 550 500 500 – 450 300 500 500 500 500 500 – 125 10 8,185 444 (55) 8,574 (1,000) (1) 6 (995) 7,579 Debentures 1 Other Add net unamortized fair value adjustments Less net unamortized debt issue costs Less current maturities Less current portion of net unamortized fair value adjustments Add current portion of net unamortized debt issue costs 1 Each series of notes and debentures is unsecured and has no sinking fund requirements prior to maturity. Each series is redeemable and has various provisions that allow redemption prior to maturity, at our option, at specified prices. We are subject to certain customary covenants including limitation on liens, merger and change of control covenants, and customary events of default. We were in compliance with these covenants as at December 31, 2019. 114 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 20 Long-Term Debt Continued The following is a summary of changes in liabilities arising from financing activities: Short-Term Debt and Current Portion of Long-Term Debt 1 Current Portion of Lease Liabilities Long-Term Debt Lease Liabilities 1,624 – 145 (794) 500 3 1,478 730 870 (927) 1,023 (72) 1,624 8 196 20 (184) 178 (4) 214 – 8 – – – 8 7,579 – 3 1,461 (500) 10 8,553 3,711 4,918 (12) (1,023) (15) 7,579 12 863 91 75 (178) (4) 859 – 12 – – – 12 Total 9,223 1,059 259 558 – 5 11,104 4,441 5,808 (939) – (87) 9,223 Balance – December 31, 2018 Adoption of IFRS 16 (Note 15) Debt acquired (Note 4) Cash flows 1 Reclassifications Foreign currency translation and other non-cash changes Balance – December 31, 2019 Balance – December 31, 2017 Debt acquired in Merger (Note 4) Cash flows 1 Reclassifications Foreign currency translation and other non-cash changes Balance – December 31, 2018 1 Cash inflows and cash outflows are presented on a net basis. Note 21 Lease Liabilities We adopted IFRS 16, “Leases” as of January 1, 2019. See Note 15 and 31 for the respective accounting policies, estimates and judgments. Lease liabilities Current portion of lease liabilities Total Rate of Interest (%) 2019 2018 3.35 3.06 859 214 1,073 12 8 20 In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 115 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 22 Payables and Accrued Charges Payables and accrued charges consist primarily of amounts we owe to suppliers and prepayments made by customers planning to purchase our products for the upcoming growing season. Payables and accrued charges as at December 31 were comprised of: Trade accounts Customer prepayments Dividends Accrued compensation Current portion of asset retirement obligations and accrued environmental costs (Note 24) Accrued interest Current portion of share-based compensation (Note 6) Current portion of derivatives Income taxes (Note 9) Current portion of pension and other post-retirement benefits (Note 23) Other payables and other accrued charges Note 23 Pension and Other Post-Retirement Benefits 2019 4,016 1,693 258 434 148 103 118 13 43 15 596 7,437 2018 3,053 1,625 526 425 156 105 87 45 47 13 621 6,703 We offer the following pension and other post-retirement benefits to qualified employees: defined benefit pension plans; defined contribution pension plans; and health, disability, dental and life insurance (referred to as other defined benefit) plans. Substantially all our employees participate in at least one of these plans. Accounting Policies, Estimates and Judgments For employee retirement and other defined benefit plans (cid:129) accrued liabilities are recorded net of plan assets; (cid:129) costs including current and past service costs, gains or losses on curtailments and settlements, and remeasurements are actuarially determined on a regular basis using the projected unit credit method; and (cid:129) past service cost is recognized in net earnings at the earlier of i) when a plan amendment or curtailment occurs; or ii) when related restructuring costs or termination benefits are recognized. Remeasurements, recognized directly in OCI in the period they occur, are comprised of actuarial gains and losses, return on plan assets (excluding amounts included in net interest) and the effect of the asset ceiling (if applicable). When a plan amendment occurs before a settlement, we recognize past service cost before any gain or loss on settlement. Defined contribution plan costs are recognized in net earnings for services rendered by employees during the period. 116 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 23 Pension and Other Post-Retirement Benefits Continued Estimates and judgments are required to determine discount rates, health care cost trend rates, projected salary increases, retirement age, longevity and termination rates. These assumptions are determined by management and are reviewed annually by our independent actuaries. Our discount rate assumptions are impacted by: (cid:129) the weighted average interest rate at which each pension and other post-retirement plan liability could be effectively settled at the measurement date; (cid:129) country specific rates; and Supporting Information (cid:129) the use of a yield curve approach based on the respective plans’ demographics, expected future pension benefits and medical claims, payments are measured and discounted to determine the present value of the expected future cash flows. The cash flows are discounted using yields on high- quality AA-rated non-callable bonds with cash flows of similar timing where there is a deep market for such bonds. Where we do not believe there is a deep market for such bonds (such as for terms in excess of 10 years in Canada), the cash flows are discounted using a yield curve derived from yields on provincial bonds rated AA or better to which a spread adjustment is added to reflect the additional risk of corporate bonds. The significant assumptions used to determine the benefit obligations and expense for our significant plans as at and for the year ended December 31 were as follows: Pension Other 2019 2018 2019 2018 Assumptions used to determine the benefit obligations 1: Discount rate (%) Rate of increase in compensation levels (%) Medical cost trend rate – assumed (%) Medical cost trend rate – year reaches ultimate trend rate Mortality assumptions (years) 3 Life expectancy at 65 for a male member currently at age 65 Life expectancy at 65 for a female member currently at age 65 Average duration of the defined benefit obligations 4 (years) 3.35 4.66 n/a n/a 20.5 22.7 14.61 4.22 4.75 n/a n/a 20.6 22.8 13.7 3.20 n/a 4.17 n/a 4.50 – 6.10 2 4.50 – 6.10 2 2037 2037 20.3 22.9 15.8 20.4 22.8 15.1 1 The current year’s expense is determined using the assumptions that existed at the end of the previous year. 2 We assumed a graded medical cost trend rate starting at 6.10 percent in 2019, moving to 4.50 percent by 2037 (2018 – starting at 6.10 percent, moving to 4.50 percent by 2037). 3 Based on actuarial advice in accordance with the latest available published tables, adjusted where appropriate to reflect future longevity improvements for each country. 4 Weighted average length of the underlying cash flows. n/a = not applicable Of the most significant assumptions, a change in discount rates has the greatest potential impact on our pension and other post- retirement benefit plans, with sensitivity to change as follows: As reported Discount rate Change in Assumption 1.0 percentage point decrease 1.0 percentage point increase 2019 2018 Benefit Obligations Expense in Earnings Before Income Taxes Benefit Obligations Recovery in Loss Before Income Taxes 2,044 335 (268) 71 9 (11) 1,797 271 (218) (87) 24 (22) In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 117 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 23 Pension and Other Post-Retirement Benefits Continued Description of Defined Benefit Pension Plans We sponsor defined benefit pension plans as follows: United States (cid:129) non-contributory, (cid:129) made to meet or exceed minimum funding Plan Type Contributions (cid:129) guaranteed annual pension payments for life, (cid:129) benefits generally depend on years of service and compensation level in the final years leading up to age 65, requirements of the Employee Retirement Income Security Act of 1974 and associated Internal Revenue Service regulations and procedures. Canada (cid:129) benefits available starting at age 55 at a reduced rate, and (cid:129) plans provide for maximum pensionable salary and maximum annual benefit limits. (cid:129) made to meet or exceed minimum funding requirements based on provincial statutory requirements and associated federal taxation rules. Supplemental Plans in US and Canada for Senior Management (cid:129) non-contributory, (cid:129) unfunded, and (cid:129) supplementary pension benefits. (cid:129) provided for by charges to earnings sufficient to meet the projected benefit obligations, and (cid:129) payments to plans are made as plan payments to retirees occur. Our defined benefit pension plans are funded with separate funds that are legally separated from the Company and administered through an employee benefits or management committee in each country, which is composed of our employees. The employee benefits or management committee is required by law to act in the best interests of the plan participants and, in the US and Canada, is responsible for the governance of the plans, including setting certain policies (e.g., investment and contribution) of the funds. The current investment policy for each country’s plans generally does not include any asset/liability matching strategies or currency hedging strategies. Plan assets held in trusts are governed by local regulations and practice in each country, as is the nature of the relationship between the Company and the trustees and their composition. 118 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 23 Pension and Other Post-Retirement Benefits Continued Description of Other Post-Retirement Plans We provide health care plans for certain eligible retired employees in the US, Canada and Trinidad. Eligibility for these benefits is generally based on a combination of age and years of service at retirement. Certain terms of the plans include: (cid:129) for certain plans, maximum lifetime benefits; (cid:129) at retirement, the employee’s spouse and certain dependent children may be eligible for coverage; (cid:129) benefits are self-insured and are administered through third-party providers; and (cid:129) generally, retirees contribute towards annual cost of the (cid:129) coordination with government-provided medical insurance plans. in each country; (cid:129) certain unfunded cost-sharing features such as co-insurance, deductibles and co-payments – benefits subject to change; We provide non-contributory life insurance plans for certain retired employees who meet specific age and service eligibility requirements. Risks The defined benefit pension and other post-retirement plans expose us to broadly similar actuarial risks. The most significant risks include investment risk and interest rate risk as discussed below. Other risks include longevity risk and salary risk. Investment Risk A deficit will be created if plan assets underperform the discount rate used in the defined benefit obligation valuation. To mitigate investment risk, we employ: (cid:129) a total return on investment approach whereby a diversified mix of equities and fixed income investments is used to maximize long-term return for a prudent level of risk; and (cid:129) risk tolerance established through careful consideration of plan liabilities, plan funded status and corporate financial condition. Other assets such as private equity and hedge funds are not used at this time. Our policy is not to invest in commodities, precious metals, mineral rights, bullions, or collectibles. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements and periodic asset/liability studies. Interest Rate Risk A decrease in bond interest rates will increase the pension liability; however, this is generally expected to be partially offset by an increase in the return on the plan’s debt investments. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 119 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 23 Pension and Other Post-Retirement Benefits Continued Financial Information Movements in the pension and other post-retirement benefit assets (liabilities) Balance – beginning of year Merger impact 1 Components of defined benefit expense recognized in earnings Current service cost for benefits earned during the year Interest (expense) income Past service cost, including curtailment gains and settlements 2 Foreign exchange rate changes and other Subtotal of components of defined benefit (expense) recovery recognized in earnings Remeasurements of the net defined benefit liability recognized in OCI during the year Actuarial gain arising from: Changes in financial assumptions Changes in demographic assumptions Loss on plan assets (excluding amounts included in net interest) Subtotal of remeasurements Cash flows Contributions by plan participants Employer contributions Benefits paid Subtotal of cash flows Balance – end of year 3 Balance comprised of: Non-current assets Other assets (Note 18) Current liabilities Payables and accrued charges (Note 22) Non-current liabilities Pension and other post-retirement benefit liabilities 2019 Plan Assets 1,416 – Obligation (1,797) – Net Obligation (381) – (1,831) (347) 2018 Plan Assets 1,380 205 – 62 – (27) Net (451) (142) (67) (15) 157 12 (67) (77) 157 39 52 35 87 210 11 – 221 (6) – 114 108 – – (149) (149) 6 53 (114) (55) 210 11 (149) 72 – 53 – 53 (40) (74) – (29) (143) (199) 14 – (185) (5) – 86 81 – 59 – 13 72 – – 193 193 5 21 (86) (60) (40) (15) – (16) (71) (199) 14 193 8 – 21 – 21 (2,044) 1,621 (423) (1,797) 1,416 (381) 25 (15) (433) 27 (13) (395) 1 We acquired Agrium’s pension and other post-retirement benefit obligations, representing the fair values at the acquisition date as described in Note 4. 2 In 2018, as part of our continuous assessment of our operations, participation (based on age and years of service) in certain company defined benefit pension and other post-retirement benefit plans was suspended and/or discontinued effective January 1, 2020. As a result, we recognized a Merger-related Defined Benefit Plans Curtailment Gain of $157. 3 Obligations arising from funded and unfunded pension plans are $(1,652) and $(392), respectively (2018 – $(1,466) and $(331)). Other post-retirement benefit plans have no plan assets and are unfunded. 120 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 23 Pension and Other Post-Retirement Benefits Continued Plan Assets As at December 31, the fair value of plan assets of our defined benefit pension plans, by asset category, were as follows: Cash and cash equivalents Equity securities and equity funds US International Debt securities 2 International balanced fund Other Total pension plan assets 8 1 35 – – – 44 Quoted Prices in Active Markets for Identical Assets 2019 Other 1 2018 Quoted Prices in Active Markets for Identical Assets Other Total 6 454 175 187 – (25) 797 54 60 65 65 329 97 9 519 240 516 97 (16) 619 1,416 112 571 62 698 112 22 Total 120 572 97 698 112 22 1,577 1,621 1 Approximately 60% of the Other plan assets are held in funds whose fair values are estimated as a practical expedient using their net asset value per share. The redemption frequency of these funds is immediate and no notice period is required. 2 Debt securities included US securities of 82 percent (2018 – 52 percent), International securities of 18 percent (2018 – 31 percent) and Mortgage-backed securities of Nil percent (2018 – 17 percent). Letters of credit secured certain of our Canadian unfunded defined benefit plan liabilities as at December 31, 2019. We expect to contribute approximately $95 to all pension and post-retirement plans during 2020. Total contributions recognized as expense under all defined contribution plans for 2019 was $88 (2018 – $75). Note 24 Asset Retirement Obligations and Accrued Environmental Costs A provision is an estimated liability with uncertainty over the timing or amount that will be paid. The most significant asset retirement and environmental remediation provisions relate to costs to restore potash and phosphate sites to their original, or another specified, condition. Accounting Policies, Estimates and Judgments Provisions are: (cid:129) measured at the present value of the cash flow expected to Asset retirement obligations and accrued environmental costs include: be required to settle the obligation; and (cid:129) reclamation and restoration costs at our potash and (cid:129) reviewed at the end of each reporting period for any changes, including the discount rate, foreign exchange rate and amount or timing of the underlying cash flows, and adjusted against the carrying amount of the provision and any related asset; otherwise, it is recognized in net earnings. As a result of the Merger, we recognized contingent liabilities, which represent additional environmental costs that are present obligations although cash outflows of resources are not probable. These contingent liabilities are subsequently measured at the higher of the amount initially recognized and the best estimate of the discounted underlying cash flows. phosphate mining operations, including management of materials generated by mining and mineral processing, such as various mine tailings and gypsum; (cid:129) land reclamation and revegetation programs; (cid:129) decommissioning of underground and surface operating facilities; (cid:129) general cleanup activities aimed at returning the areas to an environmentally acceptable condition; and (cid:129) post-closure care and maintenance. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 121 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 24 Asset Retirement Obligations and Accrued Environmental Costs Continued Estimates for provisions take into account the following: (cid:129) most provisions will not be settled for a number of years; (cid:129) environmental laws and regulations and interpretations by regulatory authorities could change or circumstances affecting our operations could change, either of which could result in significant changes to current plans; and (cid:129) the nature, extent and timing of current and proposed reclamation and closure techniques in view of present environmental laws and regulations. It is reasonably possible that the ultimate costs could change in the future and that changes to these estimates could have a material effect on our consolidated financial statements. We use appropriate technical resources, including outside consultants, to develop specific site closure and post-closure plans in accordance with the requirements of the various jurisdictions in which we operate. Other than certain land reclamation programs, settlement of the obligations is typically correlated with mine life estimates. Supporting Information The pre-tax risk-free discount rate, expected cash flow payments and sensitivity to changes in the discount rate on the recorded liability for asset retirement obligations and accrued environmental costs at December 31, 2019 were as follows: Asset retirement obligations Retail Potash Phosphate Corporate and Other 4,5 Accrued environmental costs Retail Corporate and Other Risk-Free Rate (%) 1 Cash Flow Payments (years) 2 Undiscounted Cash Flows Discounted Cash Flows 2.08 – 2.81 5.00 2.93 – 3.19 1.22 – 6.50 1 – 30 40 – 442 1 – 81 1 – 483 1.92 – 4.27 1.47 – 3.02 1 – 30 1 – 28 11 650 3 853 864 77 563 10 70 495 675 72 467 Discount Rate +0.5% -0.5% (81) 87 (14) 17 1 Risk-free discount rates reflect current market assessments of the time value of money and the risks specific to the timing and jurisdiction of the obligation. 2 Time frame in which payments are expected to principally occur from December 31, 2019. Changes in years can result from changes to the mine life and/or changes in the rate of tailing volumes. 3 Represents total undiscounted cash flows in the first year of decommissioning. This excludes subsequent years of tailings dissolution, fine tails capping, tailings management area reclamation, post reclamation activities and monitoring, and final decommissioning, which are estimated to take an additional 92 to 401 years. 4 For nitrogen sites, we have not recorded any asset retirement obligations because no significant asset retirement obligations have been identified or there is no reasonable basis for estimating a date or range of dates of cessation of operations. We considered the historical performance of our facilities as well as our planned maintenance, major upgrades and replacements which can extend the useful lives of our facilities indefinitely. 5 Includes certain potash and phosphate sites that are non-operating sites, with the majority of phosphate site payments taking place over the next 81 years. Following is a reconciliation of asset retirement obligations and accrued environmental costs: Balance – December 31, 2018 Recorded in earnings Capitalized to property, plant and equipment Settled during the year Foreign currency translation and other Balance – December 31, 2019 Balance – December 31, 2019 comprised of: Current liabilities Payables and accrued charges (Note 22) Non-current liabilities Asset retirement obligations and accrued environmental costs Asset Retirement Obligations Accrued Environmental Costs 1,295 39 5 (103) 18 1,254 123 1,131 534 17 – (16) 9 544 25 519 Total 1,829 56 5 (119) 27 1,798 148 1,650 122 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 24 Asset Retirement Obligations and Accrued Environmental Costs Continued We are subject to numerous environmental requirements under federal, provincial, state and local laws in the countries in which we operate. We have gypsum stack capping, closure and post-closure obligations through our subsidiaries, PCS Phosphate Company, Inc. in White Springs, Florida and PCS Nitrogen Inc. in Geismar, Louisiana pursuant to the financial assurance regulatory requirements in those states. The recorded provisions may not necessarily reflect our obligations under these financial assurances. Note 25 Share Capital Authorized We are authorized to issue an unlimited number of common shares without par value and an unlimited number of preferred shares. The common shares are not redeemable or convertible. The preferred shares may be issued in one or more series with rights and conditions to be determined by the Board of Directors. Issued Balance – December 31, 2018 Issued under option plans and share-settled plans Repurchased Balance – December 31, 2019 Share repurchase programs Number of Common Shares Share Capital 608,535,477 474,655 (36,067,323) 572,942,809 16,740 23 (992) 15,771 Board of Directors Approval Expiry Maximum Shares for Repurchase 2018 Normal Course Issuer Bid 1 2019 Normal Course Issuer Bid 2 February 20, 2018 February 20, 2019 February 22, 2019 February 26, 2020 50,363,686 42,164,420 1 On December 14, 2018, the normal course issuer bid was increased to permit the repurchase of up to approximately 8 percent of our outstanding common shares for cancellation. 2 On December 2, 2019, the normal course issuer bid was increased to permit the repurchase of up to 7 percent of our outstanding common shares for cancellation. Purchases of common shares can expire earlier than the date above if the maximum number of common shares allowable is acquired earlier or we otherwise decide not to make any further repurchases. Purchases under the normal course issuer bids were, or may be, made through open market purchases at market prices as well as by other means permitted by applicable securities regulatory authorities, including private agreements. The following table summarizes our share repurchases: Common shares repurchased for cancellation Average price per share Total cost 2019 2018 36,067,323 52.07 1,878 36,332,197 50.97 1,852 As of February 19, 2020, an additional 2,214,780 common shares were repurchased for cancellation at a cost of $95 and an average price per share of $42.84. Dividends declared Dividends declared for the years ended December 31 were as follows: Declared May 10, 2019 July 30, 2019 December 13, 2019 2019 Per Share Declared 0.43 0.45 0.45 1.33 February 20, 2018 May 23, 2018 July 19, 2018 November 5, 2018 December 14, 2018 2018 Per Share 0.40 0.40 0.40 0.43 0.43 2.06 Subsequent to year-end, our Board of Directors declared a quarterly dividend of $0.45 per share payable on April 16, 2020 to shareholders of record on March 31, 2020. The total estimated dividend to be paid is $257. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 123 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 26 Capital Management The objective of our capital allocation policy is to balance the return of capital to our shareholders, improvements in the efficiency of our existing assets, and delivery on our growth opportunities, while maintaining a strong balance sheet and flexible capital structure to optimize the cost of capital at an acceptable level of risk. Our goal is to pay a stable and growing dividend with a target payout that represents 40 to 60 percent of free cash flow after sustaining capital through the agricultural cycle. We monitor our capital structure and, based on changes in economic conditions, may adjust the structure by adjusting the amount of dividends paid to shareholders, repurchasing shares, issuing new shares, issuing new debt or retiring existing debt. We use a combination of short-term and long-term debt to finance our operations. We typically pay floating rates of interest on short-term debt and credit facilities, and fixed rates on notes and debentures. Adjusted net debt and adjusted shareholders’ equity are included as components of our capital structure. The calculation of adjusted net debt, adjusted shareholders’ equity and adjusted capital are set out in the following table: Short-term debt Current portion of long-term debt Current portion of lease liabilities Long-term debt Lease liabilities Total debt Cash and cash equivalents Net debt Unamortized fair value adjustments Adjusted net debt Total shareholders’ equity Accumulated other comprehensive loss Adjusted shareholders’ equity Adjusted capital We monitor the following ratios: Adjusted net debt to adjusted EBITDA Adjusted EBITDA to adjusted finance costs Adjusted net debt to adjusted capital (%) 2019 976 502 214 8,553 859 11,104 (671) 10,433 (424) 10,009 22,869 251 23,120 33,129 2019 2.5 8.0 30.2 2018 629 995 8 7,579 12 9,223 (2,314) 6,909 (444) 6,465 24,425 291 24,716 31,181 2018 1.6 8.1 20.7 124 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 26 Capital Management Continued Other components of ratios above are calculated as follows: Net earnings (loss) from continuing operations Finance costs Income tax expense (recovery) Depreciation and amortization EBITDA Impairment of assets Merger and related costs Acquisition and integration related costs Share-based compensation Foreign exchange loss (gain), net of derivatives Defined Benefit Plans Curtailment Gain Adjusted EBITDA Finance costs Unwinding of discount on asset retirement obligations Borrowing costs capitalized to property, plant and equipment Interest on net defined benefit pension and other post-retirement plan obligations Adjusted finance costs 2019 992 554 316 1,799 3,661 120 82 16 104 42 – 4,025 2019 554 (54) 18 (15) 503 2018 (31) 538 (93) 1,592 2,006 1,809 170 – 116 (10) (157) 3,934 2018 538 (51) 12 (15) 484 We maintain a base shelf prospectus, which permits issuance through April 2020 in Canada and the US, of common shares, debt, and other securities up to $11,000. Issuance of securities under the base shelf prospectus requires filing a prospectus supplement and is subject to the availability of funding in capital markets. During the year ended December 31, 2019, we filed a prospectus supplement to issue $1,500 of notes, as discussed in Note 20. Note 27 Commitments A commitment is a legally binding and enforceable agreement to purchase goods or services in the future. The amounts below reflect our commitments based on current expected contract prices. Refer to Note 31 for details pertaining to the impact of the adoption of IFRS 16 in 2019 and Note 15 for the discussion related to the accounting policies, estimates and judgments. Supporting Information Minimum future commitments under these contractual arrangements were as follows at December 31, 2019: Within 1 year 1 to 3 years 3 to 5 years Over 5 years Total 1 Includes principal portion and estimated interest. Lease Liabilities 1 Long-Term Debt 1 Purchase Commitments Capital Commitments Other Commitments 249 364 234 455 1,302 894 1,268 1,923 10,307 14,392 877 766 438 209 2,290 43 7 – – 50 118 137 58 124 437 Total 2,181 2,542 2,653 11,095 18,471 In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 125 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 27 Commitments Continued Purchase Commitments In 2018, we entered into a new long-term natural gas purchase agreement in Trinidad, that began January 1, 2019 and is set to expire December 31, 2023. The contract provides for prices that vary primarily with ammonia market prices, and annual escalating floor prices. The commitments included in the foregoing table are based on floor prices and minimum purchase quantities. Profertil has long-term gas contracts denominated in US dollars which expire in 2021, which account for virtually all of Profertil’s gas requirements. YPF S.A., our joint venture partner in Profertil, supplies approximately 70 percent of the gas under these contracts. The Carseland facility has a power co-generation agreement, expiring on December 31, 2026, which provides 60 megawatt- hours of power per hour. The price for the power is based on a fixed charge adjusted for inflation and a variable charge based on the cost of natural gas provided to the facility for power generation. Note 28 Guarantees Accounting Policies Guarantees are not recognized in the consolidated balance sheets, but are disclosed and include contracts or indemnifications that contingently require us to make payments to the guaranteed party based on: (cid:129) changes in the underlying contract or indemnification; Supporting Information In the normal course of business, we provide indemnification agreements to counterparties in transactions such as purchase and sale contracts, service agreements, director/officer contracts and leasing transactions. The terms of these indemnification agreements (cid:129) may require us to compensate counterparties for costs incurred as a result of various events, including environmental liabilities and changes in (or in the interpretation of) laws and regulations, or as a result of litigation claims or statutory sanctions that may be suffered by a counterparty as a consequence of the transaction; (cid:129) will vary based upon the contract, the nature of which prevents us from making a reasonable estimate of the Agreements for the purchase of sulfur for use in production of phosphoric acid provide for specified purchase quantities and prices based on market rates at the time of delivery. Commitments included in the foregoing table are based on expected contract prices. As part of the agreement to sell the Conda Phosphate operations (“CPO”), we entered into long-term strategic supply and offtake agreements which extend to 2023. Under the terms of the supply and offtake agreements, we will supply 100 percent of the ammonia requirements of CPO and purchase 100 percent of the monoammonium phosphate (“MAP”) product produced at CPO. The MAP production is estimated at 330,000 tonnes per year. Other Commitments Other commitments consist principally of pipeline capacity, technology service contracts, throughput and various rail and vessel freight contracts, the latest of which expires in 2026, and mineral lease commitments, the latest of which expires in 2038. (cid:129) another entity’s failure to perform under an agreement; and (cid:129) failure of a third party to pay its indebtedness when due. maximum potential amount that it could be required to pay to counterparties; and (cid:129) have not historically resulted in any significant payments by Nutrien and, as at December 31, 2019, no amounts have been accrued in the consolidated financial statements (except for accruals relating to the underlying potential liabilities). We directly guarantee certain commitments of our investee (such as railcar leases) under certain agreements with third parties. We would be required to perform on these guarantees in the event of default by the investee. No material loss is anticipated by reason of such agreements and guarantees. 126 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 29 Related Party Transactions We transact with a number of related parties, the most significant being with our associates and joint ventures, key management personnel and post-employment benefit plans. Supporting Information Sale of Goods We sell potash from our Canadian mines for use outside Canada and the US exclusively to Canpotex. Sales are at prevailing market prices and are settled on normal trade terms. Sales to Canpotex for the year ended December 31, 2019 were $1,625 (2018 – $1,657). Canpotex’s proportionate sales volumes by geographic area are shown in Note 3. The receivable outstanding from Canpotex is shown in Note 13 and arose from sale transactions described above. It is unsecured and bears no interest. There are no provisions held against this receivable. Receivables from equity holders of our equity- accounted investees For certain equity holders of our other equity-accounted investees, we have provided loans which have an outstanding balance at December 31, 2019 of $1 (2018 – $Nil). There are no provisions held against these receivables. Key Management Personnel Compensation Compensation to key management personnel was comprised of: Salaries and other short-term benefits Share-based compensation Post-employment benefits Termination benefits Transactions with Post-Employment Benefit Plans Disclosures related to our post-employment benefit plans are shown in Note 23. Note 30 Contingencies and Other Matters 2019 2018 15 31 3 12 61 19 53 3 23 98 Contingent liabilities, which are not recognized in the consolidated financial statements but may be disclosed, are possible obligations as a result of uncertain future events outside of our control, or present obligations not recognized because the amount cannot be sufficiently measured or payment is not probable. Accounting Estimates and Judgments The following judgments are required to determine our exposure to possible losses and gains related to environmental matters and other various claims and lawsuits pending: (cid:129) prediction of the outcome of uncertain events (i.e., being virtually certain, probable, remote or undeterminable); (cid:129) determination of whether recognition or disclosure in the consolidated financial statements is required; and (cid:129) estimation of potential financial effects. Where no amounts are recognized, such amounts are contingent and disclosure may be appropriate. While the amount disclosed in the consolidated financial statements may not be material, the potential for large liabilities exists and, therefore, these estimates could have a material impact on our consolidated financial statements. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 127 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 30 Contingencies and Other Matters Continued Supporting Information Canpotex Nutrien is a shareholder in Canpotex, which markets Canadian potash outside of Canada and the US. Should any operating losses or other liabilities be incurred by Canpotex, the shareholders have contractually agreed to reimburse it in proportion to each shareholder’s productive capacity. Through December 31, 2019, there were no such operating losses or other liabilities. Mining Risk The risk of underground water inflows and other underground risks is insured on a limited basis, subject to insurance market availability. Legal and Other Matters We are engaged in ongoing site assessment and/or remediation activities at a number of facilities and sites. Anticipated costs associated with these matters are added to accrued environmental costs in the manner described in Note 24. Environmental Remediation We have established provisions for environmental site assessment and/or remediation matters to the extent that expenses associated with those matters we consider likely to be incurred. Except for the uncertainties described below, we do not believe that our future obligations with respect to these matters are reasonably likely to have a material adverse effect on our consolidated financial statements. Legal matters with significant uncertainties include the following: and the related state agencies to resolve these matters. Due to the nature of the allegations, we are uncertain as to how the matters will be resolved. Based on settlements with other members of the phosphate industry, we expect that a resolution could involve any or all of the following: 1) penalties, which we currently believe will not be material; 2) modification of certain operating practices; 3) capital improvement projects; 4) providing financial assurance for the future closure, maintenance and monitoring costs for the phosphogypsum stack system; and, 5) addressing findings resulting from RCRA section 3013 site investigations undertaken voluntarily in response to the NOVs. (cid:129) In August 2015, the US EPA finalized amendments to the hazardous air pollutant emission standards for phosphoric acid manufacturing and phosphate fertilizer production (“Final Rule”). Required emissions testing at our Aurora facility in 2016 indicated alleged exceedances of the mercury emission limits that were established by the Final Rule. We have communicated with the relevant agencies about this issue and petitioned the US EPA to reconsider the mercury emission limits. The facility also entered into an agreed order with the North Carolina Department of Environmental Quality in November 2016 to resolve the alleged mercury exceedances and provide a plan and schedule for evaluating alternative compliance strategies. Given the pending legal issues and our evaluation of alternative compliance strategies, the resulting cost of compliance with the various provisions of the Final Rule cannot be predicted with reasonable certainty at this time. (cid:129) The United States Environmental Protection Agency (“US (cid:129) We operate in countries that are parties to the Paris EPA”) has an ongoing enforcement initiative directed at the phosphate industry related to the scope of an exemption for mineral processing wastes under the US Resource Conservation and Recovery Act (“RCRA”). This initiative affects the Conda Phosphate plant previously owned by Nu-West Industries, Inc. (“Nu-West”), a wholly owned subsidiary of Agrium, and the Nutrien phosphoric acid facilities in Aurora, North Carolina; Geismar, Louisiana; and White Springs, Florida. All of these facilities received US EPA notices of violation (“NOVs”) that remain outstanding for alleged violations of RCRA and various other environmental laws. Notwithstanding the sale of the Conda Phosphate operations in January 2018, Nu-West remains responsible for environmental liabilities attributable to its historic activities and for resolution of the NOVs. All of the facilities have been and continue to be involved in ongoing discussions with the US EPA, the US Department of Justice Agreement adopted in December 2015 pursuant to the United Nations Framework Convention on Climate Change. Each country that is a party to the Paris Agreement submitted an Intended Nationally Determined Contribution (“INDC”) toward the control of greenhouse gas emissions. The impacts on our operations of these INDCs and other national and local efforts to limit or tax greenhouse gas emissions cannot be determined with any certainty at this time. In addition, various other claims and lawsuits are pending against the Company in the ordinary course of business. While it is not possible to determine the ultimate outcome of such actions at this time, and inherent uncertainties exist in predicting such outcomes, we believe that the ultimate resolution of such actions is not reasonably likely to have a material adverse effect on our consolidated financial statements. 128 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 30 Contingencies and Other Matters Continued The breadth of our operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating the taxes we will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of disputes arising from federal, provincial, state and local tax audits. The resolution of these uncertainties and the associated final taxes may result in adjustments to our tax assets and tax liabilities. We own facilities that have been either permanently or indefinitely shut down. We expect to incur nominal annual expenditures for site security and other maintenance costs at some of these facilities. Should the facilities be dismantled, certain other shutdown-related costs may be incurred. Such costs are not expected to have a material adverse effect on our consolidated financial statements and would be recognized and recorded in the period in which they are incurred. Note 31 Accounting Policies, Estimates and Judgments Accounting Policies, Estimates and Judgments The following table discusses the significant accounting policies, estimates, judgments and assumptions, in addition to those disclosed elsewhere in these consolidated financial statements, that we have adopted and made and how they affect the amounts reported in the consolidated financial statements. Certain of our policies involve accounting estimates and judgments because they require us to make subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions. Topic Principles of Consolidation Accounting Policies Accounting Estimates and Judgments These consolidated financial statements include the accounts of the Company and entities we control. We have control if we have: (cid:129) power over the investee to direct its relevant activities; (cid:129) exposure, or rights, to variable returns from involvement with the investee; and (cid:129) the ability to use our power over the investee to affect the amount of our returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether we control another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. Judgment involves: (cid:129) assessing control, including if we have the power to direct the relevant activities of the investee; and (cid:129) determining the relevant activities and the party that controls them. Consideration is given to: (cid:129) voting rights; (cid:129) the relative size and dispersion of the voting rights held by other shareholders; (cid:129) the extent of participation by those shareholders in appointing key management personnel or board members; (cid:129) the right to direct the investee to enter into transactions for our benefit; and (cid:129) the exposure, or rights, to variability of returns from the Company’s involvement with the investee. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 129 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 31 Accounting Policies, Estimates and Judgments Continued Topic Principles of Consolidation (continued) Long-Lived Asset Impairment Accounting Policies Accounting Estimates and Judgments Principal (wholly owned) Operating Subsidiaries: Potash Corporation of Saskatchewan Inc. Agrium Inc. Agrium Canada Partnership Agrium Potash Ltd. Agrium U.S. Inc. Cominco Fertilizer Partnership Landmark Operations Ltd. Nutrien Ag Solutions (Canada) Inc. Nutrien Ag Solutions, Inc. PCS Nitrogen Fertilizer, LP PCS Nitrogen Trinidad Limited PCS Phosphate Company, Inc. Phosphate Holding Company, Inc. Location Canada Canada Canada Canada United States United States Australia Canada United States United States Trinidad United States United States Principal Activity Mining and/or processing of crop nutrient products and corporate functions Manufacturer and distributor of crop nutrients and corporate functions Manufacturer and distributor of crop nutrients Manufacturer and distributor of crop nutrients Manufacturer and distributor of crop nutrients Manufacturer and distributor of crop nutrients Crop input retailer Crop input retailer Crop input retailer Production of nitrogen products in the United States Production of nitrogen products in Trinidad Mining and/or processing of phosphate products Mining and/or processing of phosphate products and production of nitrogen products in the United States Intercompany balances and transactions are eliminated on consolidation. To assess impairment, assets are grouped at the smallest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (this can be at the asset or CGU level). At the end of each reporting period, we review conditions to determine whether there is any indication that an impairment exists that could potentially impact the carrying amounts of both our long-lived assets (including property, plant and equipment, and investments) to be held and used and our identifiable intangible assets and goodwill. When such indicators exist, impairment testing is performed. Regardless, goodwill is tested at least annually (in the fourth quarter). Where impairment indicators exist for the asset or CGU: (cid:129) the recoverable amount is estimated (the higher of FVLCD and value in use); (cid:129) to assess value in use, the estimated future cash flows are discounted to their present value (using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which the estimates of future cash flows have not been adjusted); (cid:129) the impairment loss is the amount by which the carrying amount exceeds its recoverable amount; and Estimates and judgment involves: (cid:129) identifying the appropriate asset or CGU; (cid:129) determining the appropriate discount rate for assessing the recoverable amount; and (cid:129) making assumptions about future sales, market conditions, terminal growth rates and cash flow forecasts over the long-term life of the assets or CGUs. We cannot predict if an event that triggers impairment will occur, when it will occur or how it will affect reported asset amounts. Asset impairment amounts previously recorded could be affected if different assumptions were used or if market and other conditions change. Such changes could result in non-cash charges materially affecting our consolidated financial statements. Impairments were recognized during 2019 and 2018 as shown in Note 15 and Note 16. At December 31, 2019, we reviewed our Phosphate CGUs for impairment triggers. For our Aurora CGU, we used judgment in assessing possible indicators of impairment including expected mine life, supply and demand variables and expected benchmark prices. Based on our assessment, there were no impairment triggers. For our White Springs CGU, we identified an impairment trigger due to deteriorating price expectations and the expected remaining mine life. We completed an impairment analysis and determined that there was no impairment in excess of the $250 impairment loss previously recorded at December 31, 2017. 130 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 31 Accounting Policies, Estimates and Judgments Continued Topic Long-Lived Asset Impairment (continued) Accounting Policies Accounting Estimates and Judgments (cid:129) the impairment loss is allocated first to reduce the carrying amount of any related goodwill and then pro rata to each asset in the unit (on the basis of the carrying amount). The following table highlights for White Springs CGU sensitivities to the recoverable amount which could result in additional impairment losses or reversals of previously recorded losses: Non-financial assets, other than goodwill, that previously suffered an impairment loss are reviewed at each reporting date for possible reversal of the impairment. Fair Value Measurements Fair value measurements are categorized into levels based on the degree to which inputs are observable and their significance: (cid:129) Level 1 – Unadjusted quoted prices (in active markets accessible at the measurement date for identical assets or liabilities). (cid:129) Level 2 – Quoted prices (in markets that are not active or based on inputs that are observable for substantially the full term of the asset or liability). (cid:129) Level 3 – Prices or valuation techniques that require inputs that are both unobservable and significant to the overall measurement. Restructuring Charges Foreign Currency Transactions Plant shutdowns, sales of business units or other corporate restructurings may trigger restructuring charges. Incremental costs for employee termination, contract termination and other exit costs are recognized as a liability and an expense when: (cid:129) a detailed formal plan for restructuring has been demonstrably committed to; (cid:129) withdrawal is without realistic possibility; and (cid:129) a reliable estimate can be made. Items included in our consolidated financial statements and those of our subsidiaries are measured using the currency of the primary economic environment in which the individual entity operates (the “functional currency”). Potential Change (percent) Increase (Decrease) to Recoverable Amount ±1.0 ±5.0 ±0.5 ±20 ±20 ±10 Key Assumptions Sales prices Forecasted EBITDA over forecast period Discount rate Fair value estimates: (cid:129) are at a point-in-time and may change in subsequent reporting periods due to market conditions or other factors; (cid:129) can be determined using multiple methods, which can cause values (or a range of reasonable values) to differ; and (cid:129) may require assumptions about costs/prices over time, discount and inflation rates, defaults and other relevant variables. Determination of the level hierarchy is based on our assessment of the lowest level input that is significant to the fair value measurement and is subject to estimation and judgment. Restructuring activities are complex, can take several months to complete and usually involve reassessing estimates throughout the process. The consolidated financial statements are presented in US dollars, which was determined to be the functional currency of the Company and the majority of our subsidiaries. In determining the functional currency of our operations, we primarily considered the currency that determines the pricing of transactions rather than focusing on the currency in which transactions are denominated. In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 131 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 31 Accounting Policies, Estimates and Judgments Continued Topic Foreign Currency Transactions (continued) Accounting Policies Accounting Estimates and Judgments Foreign exchange gains and losses resulting from the settlement of foreign currency transactions, and from the translation at period-end of monetary assets and liabilities denominated in foreign currencies, are recognized and presented in the consolidated statements of earnings within other expenses, as applicable, in the period in which they arise. Translation differences from non-monetary assets and liabilities carried at fair value are recognized changes in fair value. Translation differences on non-monetary financial assets such as investments in equity securities classified as FVTOCI are included in OCI. Non-monetary assets measured at historical cost are translated at the average monthly exchange rate prevailing at the time of the transaction, unless the exchange rate in effect on the date of the transaction is available and it is apparent that such rate is a more suitable measurement. Standards, Amendments and Interpretations Effective and Applied The International Accounting Standards Board (“IASB”) and IFRS Interpretations Committee (“IFRIC”) have issued certain standards and amendments or interpretations to existing standards that were effective and we have applied. The standards disclosed below had a material impact or disclosure impact on our consolidated financial statements. Standard IFRS 16, Leases Description Impact Issued to supersede IAS 17 and related standards, we are required to apply a new model for lessee accounting under which all leases will be recorded as a ROU asset on the balance sheet and a corresponding lease liability. Lease costs will be recognized in the income statement over the lease term as depreciation of the ROU asset and finance charges on the lease liability. ROU assets represent the right to use an asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from a lease. ROU assets and liabilities are recognized at commencement of a lease based on the present value of lease payments over the lease term. The standard requires capitalizing the lease payments and expected residual value guarantees over the initial non-cancellable period plus periods covered by renewal, purchase and termination options where such are reasonably certain of exercise. The standard requires capitalization using the interest rate implicit in the lease at commencement, or if the implicit rate is not available, an incremental borrowing rate, adjusted for term, security, asset value, and the borrower’s economic environment. We adopted IFRS 16 effective January 1, 2019, using the modified retrospective method, which in our case resulted in prospective application as there was no impact to opening retained earnings on transition. Under this method of adoption, we measured the ROU asset equal to the lease liability and used our incremental borrowing rate to determine the present value of future lease payments. We have chosen to apply practical expedients, including the use of a single discount rate for a portfolio of leases with reasonably similar characteristics, reliance on previous assessments as to whether lease contracts are onerous, exclusion of initial direct costs in measuring ROU assets at the date of initial application, the election not to separate non-lease components and instead to account for lease and non-lease components as a single arrangement, recognition exemptions for short-term and low-value leases, use of hindsight in assessing lease terms and grandfathering of the lease definition on transition. Until January 1, 2019, substantially all of our leases were classified as operating leases under IAS 17, “Leases”, with payments expensed on a straight-line basis over the lease term. 132 Nutrien Annual Report 2019 In millions of US dollars except as otherwise noted Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Note 31 Accounting Policies, Estimates and Judgments Continued IFRS 16, Leases (continued) The following table summarizes the impact of adopting IFRS 16 on the consolidated financial statements: December 31, 2018 IFRS 16 Adjustment January 1, 2019 Property, plant and equipment – ROU assets 1 Lease liabilities, including current portion 46 20 1,059 1,059 Undiscounted operating lease commitments at December 31, 2018 Operating lease commitments that did not qualify as leases under IFRS 16 Extension options reasonably certain to be exercised Effect of discounting using the incremental borrowing rate at January 1, 2019 2 Discounted operating lease commitments at January 1, 2019 2 Finance lease liabilities at December 31, 2018 Total lease liabilities at January 1, 2019 1,105 1,079 1,087 (150) 297 (175) 1,059 20 1,079 1 Balances as at December 31, 2018 reflect finance leases that were included in property, plant and equipment. 2 When measuring lease liabilities, we discounted lease payments using our incremental borrowing rate at January 1, 2019. The weighted average rate applied was 3.52 percent. Refer to Note 15 and Note 21 for additional information relating the adoption of IFRS 16. We have adopted the following amended standards and interpretations with no material impact on our consolidated financial statements: (cid:129) IFRIC 23, Uncertainty Over Income Tax Treatments (cid:129) Amendments to IFRS 3, Business Combinations (cid:129) Amendments to IAS 28, Long-term Interests in Associates (cid:129) Amendments to IAS 12, Income Taxes and Joint Ventures (cid:129) Amendments to IAS 19, Employee Benefits (cid:129) Amendments to IAS 23, Borrowing Costs Standards, Amendments and Interpretations Not Yet Effective and Not Applied The IASB and IFRIC have issued the following standards, amendments or interpretations to existing standards that were not yet effective and not applied as at December 31, 2019. The following amended standards are not expected to have a material impact on our consolidated financial statements: (cid:129) Conceptual Framework for Financial Reporting (cid:129) Amendments to IAS 1 and IAS 8, Definition of Material (cid:129) Amendments to IFRS 3, Business Combinations, Definition of a business The following amended standards and interpretations are being reviewed to determine the potential impact on our consolidated financial statements: (cid:129) IFRS 17, Insurance Contracts In millions of US dollars except as otherwise noted Nutrien Annual Report 2019 133 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Terms and Definitions Terms AECO Argus CRU Doane Alberta Energy Company, Canada Argus Media group, UK CRU International limited, UK Doane University, USA FAO or FAOSTAT Food and Agriculture Organization of the United Nations, Italy Fertecon IFA IMEA Moody’s NYMEX NYSE PNW S&P TSX USDA CDN USD AUD Scientific Terms Potash Nitrogen Phosphate Fertecon Limited, UK International Fertilizer Industry Association, France Instituto Mato-Grossense De Economia Agropecuária, Brazil Moody’s Corporation (NYSE: MCO), USA New York Mercantile Exchange, USA New York Stock Exchange, USA Pacific Northwest, USA Standard & Poor’s Financial Services LLC, USA Toronto Stock Exchange, Canada United States Department of Agriculture, USA Canadian dollar United States dollar Australian dollar KCI NH3 UAN MGA DAP MAP SPA AS potassium chloride, 60-63.2% K2 O (solid) ammonia (anhydrous), 82.2% N (liquid) nitrogen solutions, 28-32% N (liquid) merchant grade acid, 54% P2 O5 (liquid) diammonium phosphate, 46% P2 O5 (solid) monoammonium phosphate, 52% P2 O5 (solid) superphosphoric acid, 70% P2 O5 (liquid) ammonium sulfate (solid) Product Measures K2 O tonne N tonne P2 O5 tonne Measures the potassium content of products having different chemical analyses Measures the nitrogen content of products having different chemical analyses Measures the phosphorus content of products having different chemical analyses Product tonne Standard measure of the weights of all types of potash, nitrogen and phosphate products 134 Nutrien Annual Report 2019 Overview Management’s Discussion & Analysis Two Year Highlights Financial Statements Other Information Definitions Brownfield Capital deployment Community Investment Compound Annual Growth Rate Environmental Incidents Employee Turnover Rate Investing Capital New project expanding or developing an existing facility or operation Cash outlays for property, plant and equipment, intangible assets, business acquisitions (net of cash acquired), investments, dividends and repurchase of common shares. Represents cash disbursements, matching of employee gifts and in-kind contributions of equipment, goods and services and employee volunteerism (on corporate time). Represents the rate of return that would be required for an investment to grow from its beginning balance to its ending balance assuming the profits were reinvested at the end of each year of the investment’s lifespan. Number of incidents includes release quantities that exceed the US Comprehensive Environmental Response, Compensation, and Liability Act limits, in Potash facilities any release that exceeds Saskatchewan Release Limits (based on the Saskatchewan Environmental Code), non-compliance incidents that exceed $10,000 in costs to reach compliance or enforcement actions with fines exceeding $1,000. The number of permanent employees who left the Company (due to deaths and voluntary and involuntary terminations, and excluding announced workforce reductions) as a percentage of average total employees during the year. Terminations of temporary employees are excluded. Capital for significant expansions of current operations or to create cost savings (synergies), including capitalized interest. Investing capital excludes capital outlays for business acquisitions and equity- accounted investees. Greenfield capacity New operation built on undeveloped site Latin America South America, Central America, Caribbean and Mexico Lost-Time Injury Frequency Merger Total lost-time injuries for every 200,000 hours worked for all Nutrien employees, contractors and others on site. Calculated as the total lost-time injuries multiplied by 200,000 hours worked divided by the actual number of hours worked. The merger of equals transaction between PotashCorp and Agrium completed effective January 1, 2018, pursuant to which PotashCorp and Agrium combined their businesses pursuant to a statutory plan of arrangement under the Canada Business Corporations Act and became wholly owned subsidiaries of Nutrien Ltd. Mmt Million metric tonnes North America Canada and the US Offshore All markets except Canada and the US Sustaining Capital Sustaining capital expenditures are required to sustain operations at existing levels and include major repairs and maintenance and plant turnarounds. Taxes and Royalties Includes tax and royalty amounts on an accrual basis calculated as: current income tax expense from continuing and discontinued operations minus investment tax credits and realized excess tax benefit related to share-based compensation plus potash production tax, resource surcharge, royalties, municipal taxes and other miscellaneous taxes. Total Recordable Injury Frequency Total recordable injuries for every 200,000 hours worked for all Nutrien employees, contractors and others on site. Calculated as the total recordable injuries multiplied by 200,000 hours worked divided by the actual number of hours worked. Total Shareholder Return Return on investment in Nutrien shares from the time the investment is made based on two components: (1) growth in share price and (2) return from reinvested dividend income on the shares. Working Capital Ratio Current assets divided by current liabilities. Nutrien Annual Report 2019 135 Overview Management’s Discussion & Analysis Two Year Highlights & Terms Financial Statements Other Information Board of Directors Senior Management 136 Nutrien Annual Report 2019 Shareholder Information Dividends Ownership Common Share Prices Dividend amounts paid to shareholders residing in Canada are adjusted by the exchange rate applicable on the dividend record date. Dividends are normally paid in January, April, July and October with record dates normally set approximately three weeks in advance of the payment date. Future cash dividends will be paid out of, and are conditioned upon, the company’s available earnings. Shareholders who wish to have their dividends deposited directly to their bank accounts should contact the transfer agent and registrar, AST Trust Company (Canada). On February 19, 2020, there were 519 holders of record of the company’s common shares. The company’s common shares are traded on the Toronto Stock Exchange and the New York Stock Exchange. Nutrien is included in the S&P/TSX 60 and the S&P/TSX Composite indices. Offices Nutrien’s registered head office is: It also has corporate offices at: Suite 500, 122 – 1st Avenue South Saskatoon, Saskatchewan Canada S7K 7G3 13131 Lake Fraser Drive SE Calgary, Alberta Canada T2J 7E8 5296 Harvest Lake Drive Loveland, Colorado US 80538 Investor Relations Investor Relations Department Email investors@nutrien.com Phone (403) 225-7451 Transfer Agent NYSE Corporate Governance The certifications required by Section 302 of the Sarbanes- Oxley Act of 2002 are filed as exhibits to our 2019 Annual Report on Form 40-F. You can contact AST Trust Company (Canada), the corporation’s transfer agent, as follows: Phone Fax Mail 1-800-387-0825 (toll-free within Canada and the US) 1-416-682-3860 (from any country other than Canada and the US) 1-514-985-8843 (all countries) P.O. Box 1 320 Bay Street Toronto, ON M5H 4A6 Website www.astfinancial.com 

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