Nutrien Annual Report 2020

Plain-text annual report

LEADING SOLUTIONS FOR SUSTAINABLE AGRICULTURE Annual Report 2020 Corporate Overview Letter from the President and CEO Managementʼs Discussion & Analysis Nutrienʼs Global Profile Nutrienʼs Strategy Focused Approach to Value Creation Operating Segment Performance & Outlook Financial Overview Enterprise Risk Management Other and Appendix Three-Year Highlights Financial Statements & Notes 1 6 9 10 11 12 19 45 58 62 70 72 Terms & Definitions 133 Board of Directors & Senior Management 135 About this report: You can find this report and information on Nutrien on our website at nutrien.com. While we include certain non-financial information in this report, more detailed information on our sustainability strategy and performance is provided on our website at nutrien.com/sustainability. 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: For definitions, further information and reconciliation of these measures to the most directly comparable measures under IFRS, see the “Non-IFRS Financial Measures” section. • Adjusted EBITDA and related guidance • Adjusted net earnings per share • Free cash flow and free cash flow including changes in non-cash operating working capital • Retail adjusted EBITDA per US selling location • Retail adjusted average working capital to sales • Retail cash operating coverage ratio • Potash cash cost of product manufactured See the “Terms and Definitions” section for definitions, abbreviations and terms used in this annual report. LEADING SOLUTIONS FOR SUSTAINABLE AGRICULTURE Supporting growers in their pursuit to feed the future is ingrained in everything we do. Nutrien is helping growers around the world to do more, grow more, feed more – all in an increasingly innovative and sustainable way. More than 200 million people have been added to the global population since 2018, and Nutrien is focused on supporting growers to meet the challenge of feeding this growing world. We will continue to work in lockstep with growers and other stakeholders to meet the challenge of feeding another 2 billion people expected to be added to the global population over the next 30 years. Nutrien is reshaping what it means to be an agricultural input provider and we are developing tools and solutions to enhance agricultural productivity and sustainability practices. We built a groundbreaking digital platform, we offer innovative products and solutions that address a changing agriculture landscape and we introduced our revolutionary end-to-end Carbon Program. Supported by our unique and advantaged position across the agricultural value chain, Nutrien will be unrelenting in our pursuit of offering Leading Solutions for Sustainable Agriculture to feed the future. 2 BILLION ADDITIONAL PEOPLE TO FEED BY 2050 #1 AGRICULTURE RETAILER GLOBALLY BY SIZE #1 LARGEST POTASH PRODUCER BY CAPACITY A LEADER IN CARBON MANAGEMENT & SUSTAINABLE AGRICULTURE Source: United Nations, Nutrien 1 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other InformationGENERATING SUPERIOR LONG-TERM VALUE Unique Competitive Advantages for Today and the Future Nutrien is uniquely positioned with a value enhancing business model that we believe provides a clear path for superior returns for shareholders. We are delivering leading whole-acre solutions backed by world class assets, and we are shaping the agricultural landscape of tomorrow. We expect to grow and optimize our business to deliver value that is under our control while our integrated business provides significant earnings leverage to strengthening agriculture and fertilizer fundamentals and prices. GROWING OUR BUSINESS – UNDER OUR CONTROL Nutrien is committed to growing earnings through network optimization, cost management, expanded production, organic growth and accretive acquisitions. NUTRIEN AG SOLUTIONS (“RETAIL”) We are bolstering our position as the leading retail provider of crop inputs by staying focused on our grower customers. We expect to deliver 3 percent organic adjusted EBITDA growth annually for the next three years, via customer value creation including deeper penetration of our proprietary product portfolio, growth in digital and financing capabilities, and optimization of our network and sustainability solutions. We are executing on our accretive tuck-in strategy in the US and replicating our Retail model in underserved markets, such as Brazil, to leverage the benefits of our business to quickly add efficiencies, achieve synergies and deliver growth. POTASH We operate the most reliable, safe, and efficient Potash assets as part of a diverse and flexible mine network. This allows us to position the right tonnes at the right time and to minimize risk. We are unique and advantaged, with 5 million tonnes of incremental available capacity and with the option to build an additional 5 million tonnes in brownfield expansion as needed – significantly more quickly and at a lower cost than any greenfield projects. We are progressing our Next Generation Potash program, which is focused on using the latest mining automation and digital technologies from the mine face right through to the mill. This is expected to further lower our production cost per tonne and improve safety performance. NITROGEN & PHOSPHATE Our Nitrogen production network is low-cost and diversified, with opportunities to execute high- return and low-risk brownfield projects, expand our production of sustainability products and significantly lower our carbon footprint. Nutrien is already one of the largest producers of blue/low carbon ammonia in the world. Operational initiatives in our Nitrogen and Phosphate businesses are expected to lower production costs per tonne, increase asset utilization and increase sales volumes. Longer-term, we anticipate there could be significant growth potential for ammonia as a means to transport hydrogen as fuel, which we are well positioned to supply. 2 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other InformationEARNINGS LEVERAGE Nutrien has significant earnings leverage to improving agriculture and fertilizer fundamentals. +$650M1 ESTIMATED ANNUAL IMPACT TO NUTRIEN ADJ. EBITDA FROM A $25/MT INCREASE IN FERTILIZER PRICES MORE THAN +$100M ESTIMATED ANNUAL IMPACT TO NUTRIEN ADJ. EBITDA FROM AN ADDITIONAL 1MMT OF POTASH SALES VOLUMES 1 Excludes the impact of rising fertilizer prices on Nutrien Ag Solutions and provincial mining and production taxes. FERTILIZER PRICES Nutrien produces and distributes approximately 27 million tonnes of potash, nitrogen and phosphate annually which creates significant earnings leverage when fertilizer prices improve. Fertilizer prices have begun to recover from cyclical lows and are now above 3 year average levels, but below greenfield project economics. Underlying fundamentals for potash and nitrogen in particular, are strengthening, providing tremendous earnings growth potential. SALES VOLUMES We have an additional 5 million tonnes of available potash capacity beyond existing production levels, a characteristic unique to Nutrien in the potash industry. We expect to deploy this available capacity as global demand grows, increasing our sales volumes and further lowering our production costs per tonne. FINANCIAL STRENGTH, STABILITY & CREDIBILITY We believe Nutrien is the best positioned company in the agriculture input space with a track record of delivering growth, value and strong shareholder returns. STRONG BALANCE SHEET & CASH FLOWS Nutrien’s integrated business model provides a diversified earnings base, underpinned by stable growth in Nutrien Ag Solutions and earnings torque from Potash, Nitrogen and Phosphate. This integrated model generates strong free cash flows, and facilitates efficient allocation of capital to grow our business while maintaining a strong balance sheet. CREDIBILITY Nutrien has a proven track record of execution including delivering company synergies, strategic growth and strong shareholder returns. Our sights are aimed on growth and optimization of our existing business, forging a path for the future of agriculture while maximizing shareholder returns. FREE CASH FLOW ($ millions) Free Cash Flow $2,157 $1,975 $1,830 Free Cash Flow Including Changes in Non-Cash Operating Working Capital $2,647 $2,404 $837 ADJUSTED EBITDA ($ billions) 2021 Adjusted EBITDA Guidance Range Adjusted Net Debt/Adjusted EBITDA $4.0-$4.5 $3.0 3.1x $3.9 $4.0 2.5x 1.6x $3.7 2.6x 2018 2019 2020 2018 2019 2020 2017 2018 2019 2020 2021F1 Source: Nutrien Source: Nutrien 1 Based on adjusted EBITDA guidance provided on February 17, 2021. 3 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information2020 FINANCIAL & OPERATING HIGHLIGHTS Committed to Growing, Optimizing and Delivering We are raising expectations of what an agriculture company can be, by improving our business today and continually positioning ourselves for tomorrow. Financial Operational 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 $3.7B ADJUSTED EBITDA $4.0B $3.7B $4.0B $3.7B $4.0B $3.7B $1.08M RETAIL ADJUSTED EBITDA PER US SELLING LOCATION $0.97M $1.08M $0.97M $1.08M $0.97M $1.08M 2019 2020 2019 2020 2019 2020 $4.0B $3.7B 2019 2020 $0.97M $1.08M $3.3B CASH PROVIDED BY OPERATING ACTIVITIES $3.7B $3.3B $3.7B $3.3B $3.7B $3.3B $3.7B $3.3B $1.8B FREE CASH FLOW $2.2B $1.8B $2.2B $1.8B $2.2B $1.8B $2.2B $1.8B $5.2B GROSS MARGIN 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 10% RETAIL ADJUSTED EBITDA MARGIN $59POTASH CASH COPM PER TONNE 2 93% AMMONIA OPERATING RATE 3 9% 10% 9% 10% 9% 10% 9% 10% $63 $59 $63 $59 $63 $59 $63 $59 Sustainable 20% ESG RATING IMPROVEMENT 1 NA 20 NA 20 NA 20 NA 20 2019 2020 2019 2020 2019 2020 2019 2020 ~1MMT 2019 NA BLUE / LOW CARBON 2020 1 Mmt 2019 AMMONIA PRODUCTION CAPABILITY NA 2020 1 Mmt 2019 NA 2020 1 Mmt 2019 2020 NA 1 Mmt 25% PROPORTION OF FEMALE VICE PRESIDENT AND ABOVE >500K US SOIL SAMPLE TESTS PERFORMED 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 25% 25% 25% 25% 25% 25% 25% 25% >400K >500K >400K >500K >400K >500K >400K >500K 2019 2020 2019 2020 2019 1 2020 $5.5B $5.2B $5.5B $5.2B $5.5B $5.2B 2019 2020 2019 2020 2019 2020 91% 93% 91% 93% 91% 93% ESG rating improvement from external rating agencies that provide a numeric score: MSCI ESG Rating, CDP Climate, S&P Global CSA, Sustainalytics ESG Risk ISS Quality Scores, FTSE Russell. 2 Cash cost of product manufactured. 2019 3 Excludes Trinidad and Joffre. 2020 $5.5B $5.2B 2019 2020 91% 93% 2019 2020 4 FIND OUT MORE AT NUTRIEN.COM Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information FINANCIAL & OPERATING SUMMARY Year ended December 31 (millions of US dollars, except as otherwise noted) 2020 2019 Change (%) Financial Performance Sales Gross Margin Adjusted EBITDA Retail Adjusted EBITDA Potash Adjusted EBITDA Nitrogen Adjusted EBITDA Phosphate Adjusted EBITDA Earnings per Share Adjusted Net Earnings per Share Strategic Initiatives Cash Provided by Operating Activities Free Cash Flow Dividend Payout/Free Cash Flow Adjusted Net Debt/Adjusted EBITDA Working Capital Ratio Retail Adjusted EBITDA to Sales Retail Adjusted Average Working Capital to Sales $ 20,908 $ 20,084 5,239 3,667 1,430 1,190 1,080 232 0.81 1.80 5,502 4,025 1,231 1,593 1,239 194 1.70 2.17 $ $ 3,323 1,830 $ $ 3,665 2,157 56% 2.6x 1.4 10% 15% 47% 2.5x 1.2 9% 23% Retail Adjusted EBITDA per US Selling Location $ 1.075 $ 0.967 Retail Cash Operating Coverage Ratio1 Potash Cash COPM per Tonne Ammonia Operating Rate Non-Financial Performance CO2 Equivalent Captured (Mmt) Lost-Time Injury Frequency 2 Total Employees Voluntary Employee Turnover Rate 3 Community Investment Environmental Incidents $ $ 61% 59 93% 1.0 0.25 $ 62% 63 91% 1.2 0.34 23,100 22,300 9% 18 23 $ 9% 17 23 1 Adjusted to reflect what the metric would have been prior to a reclassification of certain immaterial figures. 2 Frequency based for every 200,000 hours worked. 3 Based on regular full-time and part-time employees. +4 -5 -9 +16 -25 -13 +20 -52 -17 -9 -15 +9 +4 +17 +1 -8 +11 -1 -6 +2 -17 -26 +4 – +6 – 5 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information LETTER FROM THE PRESIDENT AND CEO 2020 will go down in the history books as a year like no other and I hope that as you are reading this you and your loved ones are safe and healthy. While virtually every person, community and sector of the economy has been impacted by COVID-19, demand for agriculture products and crop inputs has shown incredible resilience. “ We believe Nutrien is the best-positioned company in the ag sector to capitalize on improving market fundamentals.” Chuck Magro, President and Chief Executive Officer – Nutrien The importance of food security and agriculture’s purpose Our sector and Company have a responsibility to provide to feed the world has never been more apparent and the world’s farmers with the crop inputs needed to grow important. Nutrien continued to execute its strategy and again and produce healthy and nutritious food. In fact, we did demonstrated stability with its business model which is built just that. At the outset of the pandemic we rolled out a to weather market volatility. Nutrien is positioned to take comprehensive operating plan and have been adapting to advantage of the strengthening agricultural fundamentals we new developments ever since. We implemented COVID-19 saw this past year and into 2021. protocols across our operations to help protect and support While COVID-19 created significant challenges for most companies globally, Nutrien successfully stuck to our strategy, stayed the course and demonstrated stability. In fact, thanks to the adaptability, resilience and stamina of our more than 23,000 employees worldwide, we were able to work together in an organized and proactive manner to allow Nutrien to not only weather the storm, but to continue to grow and strengthen our business. Having said this I recognize it’s been a very challenging year for people around the globe, including many of our employees and communities where we operate. At our employees, and our facilities have been able to continue to operate at normal rates, and in many cases even above pre-COVID-19 levels. Virtually all of our corporate staff shifted to working from home in early 2020 and we expect that to continue until it is safe to return to our offices, which may vary by region. We also hosted frequent company-wide webcasts to ensure an open exchange of information with the Executive Leadership Team and all Nutrien employees, which is ongoing. We remain committed to helping ensure our employees and communities have the tools and support they need to weather this storm. Nutrien, we strive to recognize and support our key Looking into 2021, the outlook for our business shows stakeholders in a multitude of ways to address the significant strengthening in market fundamentals. This is challenges created by the global pandemic. supported by much stronger crop prices globally and 6 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Informationfarmers’ cash margins above 9-year highs, which is due to a reduce our cash cost of production per tonne which resulted combination of strong global demand for grains and oilseeds in record low results for Nutrien. The outlook for potash has and lower-than-expected crop production in 2020. improved for 2021, starting the year at much higher prices PROGRESS AND PERFORMANCE than the average in 2020, while remaining very affordable for growers. For our Nitrogen business, we achieved record high Taking a step back for reflection, it has been three years since sales volumes in 2020 through higher combined ammonia the formation of Nutrien and I believe the benefits of the operating rates at our North American facilities and the merger are clearly evident. If you look at our 2017 combined benefit from recent brownfield debottleneck expansions historical adjusted EBITDA levels and adjust them for the which were brought on-stream on time and on budget. lower average fertilizer prices in 2020, our 2020 adjusted EBITDA is $900 million higher – thanks primarily to the over $650 million in ongoing synergies we captured as a result of the merger. Furthermore, over this time we increased our dividend by 15 percent, bought back 12 percent of our common shares outstanding and have grown our Nutrien Ag Solutions business by over 20 percent – all while having one of the best health and safety records in the industry. We sold our 26 percent equity position in the Misr Fertilizers Production Company S.A.E. (“MOPCO”) nitrogen facility in Egypt for $540 million, and expect to redeploy the proceeds to generate higher returns for shareholders. This is another example of our commitment to a continual and rigorous portfolio review to optimize our business. OUR ESG AND SUSTAINABILITY GOALS During 2020, we also made good progress toward our targets During 2020, we made great strides towards our goal to for virtually all of the key metrics that we identified in 2019, be the leader in sustainability in the global agriculture sector. as we continue to focus on controlling our controllables. This included improved cash cost of production per tonne for potash and nitrogen, increasing Retail adjusted EBITDA per US selling location, stronger adjusted EBITDA margins for our Nutrien Ag Solutions business and improved Retail average working capital and cash operating coverage results. We continued to grow Nutrien Ag Solutions in 2020, particularly in Australia, Brazil and the US. The Ruralco Holdings Limited (“Ruralco”) acquisition in Australia, which closed in late 2019, has been an exceptional acquisition as we have captured the originally identified $30 million in synergies ahead of schedule, and announced a further $20 million in synergies expected to be captured by the end of 2021. In Brazil, we made two acquisitions in 2020 and expect run-rate revenue in Brazil to surpass $500 million in 2021. We anticipate Brazil could generate $100 million in annual adjusted EBITDA within the next three years. Another major success story this year was the acceptance and adoption of our leading Retail digital platform, where sales exceeded $1.2 billion in 2020 – more than double the goal of $500 million we had set at the start of the year. While the pandemic played a role in the rapid rate of use, we believe this strong and positive trend will continue, particularly given the new functionalities we expect to introduce. Within our Potash operations we increased sales volumes by over 1 million tonnes this year, and took actions to further That is one of the reasons our theme for this year’s Annual Report is “Leading Solutions for Sustainable Agriculture” and we have taken that challenge and opportunity to heart. We are working on our broader climate-smart strategy, with numerous investments made over the years to develop climate-friendly products and services. For example, Nutrien is one of the leading producers of blue/ low carbon ammonia, with approximately 1 million tonnes of production capability. Looking back on 2020, we achieved an approximate 20 percent improvement in our overall ESG ratings, and made substantial progress compared to our peer groups. We expect to unveil a comprehensive long-term strategy, plans and targets in April 2021 to continue to demonstrate our leadership in this area. In the area of safety, health and environment, I’m pleased to report that 2020 was our most successful year to date which meant we sent more workers home safe each day and maintained a low level of environmental incidents. We believe our safety culture and leadership are the primary drivers of these results. By focusing on prevention of incidents, increasing awareness through leadership presence, and creating an open dialogue environment, we improved performance. We expect to build on this year’s excellent results, as nothing is more important to me, the Nutrien Executive Leadership Team or the Board of Directors than the well-being of our people and the communities in which we operate. 7 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other InformationIn late 2020, Nutrien announced what we expect will be We also gave back to the communities in which we the world’s leading carbon management and sustainable operate, particularly in this year of increased need. We agriculture program, and I believe we are uniquely contributed $18 million in community investment including positioned to offer the industry’s most comprehensive approximately $2 million for hunger relief, working with over end-to-end carbon program. The program makes it easy 200 charities supporting food programs in North America, for growers to adopt more sustainable agronomic practices Australia, South America and Trinidad. Disaster relief needs that generate significant financial benefits for the grower, were also high this year and we donated nearly $250,000 to while also delivering positive carbon outcomes that can local communities impacted by fires in the Western US and be seamlessly verified, thereby creating carbon credits that Australia, as well those impacted by the Derecho storm in can be traded. We have the opportunity to leverage and Iowa and hurricanes in the Southern US. further strengthen our trusted and direct relationship with growers across North and South America and Australia, with LOOKING AHEAD year-round and full-acre agronomic support and advice. Our We believe Nutrien is the best-positioned company in the position is further strengthened by our investments in our ag sector to capitalize on improving market fundamentals, integrated digital hub, which streamlines data collection and and to capture additional potash volume the market needs the measurement of sustainability performance, leveraging by using our 5 million tonnes of strategic available capacity. one of the widest ranges of proprietary and third-party We have levers to grow our earnings significantly, with products and value-added services in the industry. Nutrien is actions under our control and as market fundamentals well positioned to succeed and support all aspects of carbon continue to improve. We will benefit from stronger global credit generation and monetization given the breadth of our agricultural markets and the expected improvement in the assets, capabilities, digital platform, industry leadership and fertilizer cycle – and as always we will focus on what we access to and strong relationships with growers. can control and follow through on our commitments. In the coming years I plan to call on companies and leaders As the world’s largest provider of crop inputs, services and across the agriculture industry, as well as governments, solutions, Nutrien has a vital role to play in producing more to come together to put in place the systems and policies food and delivering on our purpose to Grow Our World needed to establish a new carbon economy for from the Ground Up. 2020 has been a challenging year for agriculture. We believe climate change is one of the everyone, including Nutrien’s over 23,000 employees world’s biggest issues. From a people perspective, we are pleased to report the results of our 2020 employee engagement survey, where our overall engagement score was 89 percent, a leading score among peers. We are advancing efforts related to diversity and inclusion, and in 2020, we established a Global Inclusion Council of Senior Leaders from each globally, who by working together, have made a major contribution to feeding the world and delivering strong results through this pandemic. On behalf of the Board and the Executive Leadership Team, I want to thank our valued employees, customers and communities in which we operate for the commitment they have shown during these unprecedented times. business unit and geography. We also structured a new Thank You, equity, diversity and inclusion (“EDI”) center of excellence which will be operationalized in the first quarter of 2021 and we will provide targets and goals. Lastly, in November Nutrien was named one of Canada’s Top Employers for the second year in a row. This is one of several awards Chuck Magro and recognitions we have received recently, in addition President and Chief Executive Officer to, Achievers 50 Most Engaged Workplaces, Canada’s Top Employers for Young People, Canada’s Best Diversity Employers and Saskatchewan’s Top Employer. February 18, 2021 8 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other InformationMANAGEMENT’S DISCUSSION & ANALYSIS As at and for the year ended December 31, 2020 The following management’s discussion and analysis (“MD&A”) is the responsibility of management and is dated as of February 18, 2021. The Board of Directors (“Board”) 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 approval of this disclosure. The Board 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. This MD&A is based on the Company’s audited consolidated financial statements for the year ended December 31, 2020 (“financial statements”) based on International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, 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: • Adjusted EBITDA • Adjusted net earnings and adjusted net earnings • Potash cash cost of product manufactured • Ammonia controllable cash cost of product per share manufactured • Adjusted EBITDA, adjusted net earnings per share and sustaining capital expenditures guidance • Free cash flow and free cash flow including • Retail adjusted average working capital to sales • Retail adjusted average working capital to sales excluding Nutrien Financial changes in non-cash operating working capital • Retail cash operating coverage ratio • Retail normalized comparable store sales • Retail adjusted EBITDA per US selling location • Nutrien Financial net interest margin • Sustaining and investing capital expenditures • Gross margin excluding depreciation and amortization per tonne - manufactured For definitions, further information and reconciliation of these measures to the most directly comparable measures under IFRS, see the “Non-IFRS Financial Measures” section. Also see the cautionary statement in the “Forward-Looking Statements” section. 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 the “Terms and Definitions” section for definitions, abbreviations and terms used in this 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, 2020, 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 Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information NUTRIEN’S GLOBAL PROFILE We operate globally & across the agriculture value chain Nutrien is the world’s largest provider of crop inputs and services, playing a critical role in helping growers increase food production in a sustainable manner. We produce and distribute 27 million tonnes of potash, nitrogen and phosphate products worldwide and we deliver leading solutions through the world’s premier Ag retail network, providing exceptional access to growers across three continents. We continue to enhance our production and distribution capabilities across multiple paths including the development of our leading digital platform in the Ag retail market. We operate in 13 countries with more than 23,000 employees globally. Nutrien Ag Solutions (“Retail”) Potash ~1,500 NORTH AMERICA LOCATIONS >425 AUSTRALIA LOCATIONS >35 BRAZIL LOCATIONS >70 OTHER LOCATIONS 20.6 MMT NAMEPLATE CAPACITY 6 POTASH MINES ~300 NORTH AMERICAN DISTRIBUTION POINTS >40 COUNTRIES SERVED Nitrogen 14PRODUCTION FACILITIES 13AMMONIA PLANTS 16PRODUCTS PRODUCED ~60% FERTILIZER RELATED SALES FIND OUT MORE Nutrien Factbook Nutrien Digital Video Nutrien Ag Solutions Potash Facility Tour To view and download our Industry Factbook, visit https://www.nutrien.com/ resources To view the Nutrien Digital video, visit https://www. youtube.com/watch?v=Swg06_ cjvno&feature=youtu.be To view A Day in the Life of Nutrien Ag Solutions, visit https://www.youtube. com/watch?v=OnUF1e1Do_ A&t=70s To view the Nutrien Potash Facility Tour, visit https://www.youtube.com/ watch?v=OFECEkOcb4w 10 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information NUTRIEN’S STRATEGY At Nutrien, our purpose is to Grow Our World from the Ground Up. Our unique mix of world-class assets and position across the agricultural value chain provides exceptional opportunities to create value. Nutrien’s strategy is to strengthen our channel to the grower and improve our competitive position as the world’s largest crop input retailer through optimizing our world-class and low-cost production assets. We are focused on optimizing and investing in our business to create superior value for both shareholders and customers. 1 ENHANCING OUR LEADING POSITION 2 LEVERAGING TECHNOLOGY We focus on enhancing our world-class and low-cost potash and nitrogen production network and creating value and efficiencies through the integration of our supply chain. This includes the optimization and growth of the world’s largest Ag retail network. We develop and deliver value-enhancing whole-acre solutions to help growers produce abundant, healthy and sustainable food. These solutions include our comprehensive digital capabilities, agronomic tools and deep portfolio of proprietary products. We invest in new tools and solutions to help lower our costs, to drive efficiencies and safety and to better serve our customers, including the use of leading solutions for sustainable agriculture. We developed the leading digital agriculture retail platform that provides field planning, digital agronomy, e-commerce and sustainability solutions and we continue to expand our proprietary product portfolio. Our Next Generation Potash program continues to progress and we are executing initiatives in Nitrogen that leverage technology to lower production costs, increase efficiency and improve safety and sustainability results. 3 LEADING AG SUSTAINABILITY 4 GROWING RETURNS & FINANCIAL STABILITY Nutrien is focused on creating long-term value for shareholders, including earnings growth. We believe much of this growth is within our control by investing in our world-class Retail business, growing nutrient production and optimizing the entire network. Our capital allocation policy prioritizes sustaining our assets, preserving the strength and resiliency of our balance sheet, supporting a sustainable and growing dividend and applying a rigorous compete-for-capital reinvestment strategy to maximize shareholder value. Nutrien is focused on being a leader in reducing carbon emissions generated along the ag value chain. Nutrien’s Carbon Program creates the opportunity to financially reward growers who apply best practices and climate smart products, which is expected to drive a step change in agricultural sustainability and improved carbon management. By leveraging our unique relationship with the grower, we can deliver an end-to-end program where we can add value throughout. At our nitrogen production facilities, we have the capability to produce approximately 1 million tonnes of blue/low carbon ammonia annually, we are planning to expand the production of sustainable products and we are further planning to reduce our carbon footprint through energy use efficiency and abatement projects. At our potash mines, we are planning to reduce our carbon footprint and lower our costs through self-generated electricity and heat, and we are progressing projects to improve water management. 11 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information FOCUSED APPROACH TO VALUE CREATION We developed a specific approach to capital allocation and clearly defined a strategy to grow the business, improve efficiencies and create value. We established several priorities and initiatives designed to create value and deliver Leading Solutions for Sustainable Agriculture and we set clearly defined targets and performance metrics to measure progress. Our strategy and performance are supported by governance oversight and risk management by our Executive Leadership Team and Board of Directors. 13 14 01 PLAN 03 PRODUCE 05 PRESERVE 02 PLANT 04 PROFIT 15 16 17 18 NUTRIEN’S ENVIRONMENT, SOCIAL AND GOVERNANCE (“ESG”) STRATEGY Raising expectations of what an agriculture company can be. NUTRIEN’S CARBON PROGRAM Nutrien is working to solve some of the world’s biggest challenges: producing more food with less land, water and environmental impact. NUTRIEN AG SOLUTIONS Driving a change in agriculture that delivers growth and reinforces our competitive advantages. A GLOBAL LEADER IN POTASH Growing sales with global demand and lowering production costs within our flexible network of mines. WELL POSITIONED NITROGEN OPERATIONS Improving operating rates, reducing greenhouse gas (“GHG”) emissions and positioning for alternative product potential. CAPITAL ALLOCATION Focusing on financial growth and shareholder returns. 12 Nutrien Annual Report2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information NUTRIEN’S ESG STRATEGY At Nutrien, we are raising expectations of what an agriculture company can be and how we can make positive contributions. We are integrating ESG practices across our Company with a cohesive strategy that is driven by our leadership and governance. Over the past year, our third party ESG ratings have increased by approximately 20 percent and our goal is to further improve by delivering a comprehensive ESG strategy and related targets in 2021. The strategy will provide a roadmap for our initiatives, targets and goals while creating accountability. ENVIRONMENT SOCIAL GOVERNANCE We embed strong corporate governance systems and principles in our business through a diverse and independent Board of Directors, strong ethical principles that inform our activities, and rigorous systems for cybersecurity and data privacy. Nutrien’s corporate governance framework includes policies and processes that define the roles of the Board and Executive Leadership Team. It also ensures that our business practices meet high ethical standards. LEARN MORE https://www.nutrien.com/what- we-do/governance We are committed to reducing the environmental impacts of our operations on air, land and water, and developing products and innovative solutions that help growers tackle the environmental challenges facing the agriculture industry. Working with growers to apply today’s best practices is key to the sustainability of the agriculture industry. Development of new technologies, practices and programs are required to support this journey, which is why Nutrien launched a comprehensive agriculture carbon program and continues to invest in the development of a portfolio of sustainable products and solutions for growers. We are also helping drive nutrient use efficiency and farm productivity, provide environmentally sustainable soil and plant health solutions, and enable digital agronomic and sustainability analysis. LEARN MORE Nutrien's Carbon Program p14 Blue/low Carbon Ammonia p17 Next Generation Potash p16 As part of Nutrien’s purpose driven culture, we aim to develop respectful and positive relationships with our employees, contractors, suppliers, customers, and local communities. We attract and retain our people by investing in the experience and engagement of our employees, developing the best talent, and fostering diversity and inclusion in Nutrien’s culture. In addition, we have an effective succession management process to safeguard the long-term achievement of our strategy. Nothing is more important to Nutrien than the well-being of our employees, which was emphasized by our response during the COVID-19 pandemic. Ensuring safe operations and delivering on our commitment to keep employees and contractors safe are also essential elements of delivering strong business performance. 13 Nutrien Annual Report2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information NUTRIEN’S CARBON PROGRAM We have an opportunity to make a significant contribution to farming both from an environmental and an economic perspective. Doing so will require a new way of thinking about carbon and unprecedented collaboration across the value chain. “ Nutrien is working to solve some of the world’s biggest challenges: producing more food with less land, water and environmental impact.” Chuck Magro, President and Chief Executive Officer – Nutrien FIND OUT MORE https://www.nutrien.com/sustainability/carbon-program 01 PLAN 03 PRODUCE 05 PRESERVE 02 PLANT 04 PROFIT NUTRIEN’S CARBON PROGRAM Nutrien launched what we expect to be the agricultural industry’s most comprehensive end-to-end carbon program with a goal of making it easier for growers to increase productivity, improve sustainability and boost profitability. The program is designed to increase grower margins per acre and generate verifiable carbon credits that can be monetized. This revolutionary program begins by targeting 100,000 acres of pilot farmland across North America in 2021 followed by a full roll-out, then a launch in Australia and South America. We are designing scalable programs that facilitate the use of climate smart inputs and sustainable practices to reduce GHG emissions, improve soil carbon sequestration, and measure the positive financial, productivity and environmental impacts. NUTRIEN’S ROLE Nutrien is uniquely positioned to be a leader due to our trusted relationship with growers, our focus on full acre solutions and our leading digital capabilities. Leveraging our digital crop planning capabilities, we build customized field plans that target agronomic practices and product recommendations designed to generate positive carbon outcomes and drive yield efficiency. Nutrien’s comprehensive Carbon Program is expected to deliver benefits to growers and the environment while engaging a broad base of value-chain partners and stakeholders. We believe this will foster further adoption of sustainable agricultural practices that drive positive environmental outcomes and preserve security of global food production to feed the world’s growing population. ~$30POTENTIAL PER ACRE 1 Increased agronomic profitability (before carbon credits and may vary significantly based on existing practices). ~1-2 MT CO2e/ACRE 1 Reduced or sequestered, depending on grower practices adopted – an incremental revenue stream that could be worth +$10-20 per tonne as voluntary markets grow. 85% OF CURRENT AG EMISSIONS EXPECTED TO BE OFFSET GLOBALLY BY 2050 1 (excluding livestock production, land use, land-use change and forestry) 1 Estimated run-rate impact from ag industry carbon management improvements and representing the potential range of benefits from Nutrien's Carbon Program. 14 Nutrien Annual Report2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information NUTRIEN AG SOLUTIONS Nutrien Ag Solutions is the leading Ag retailer globally with multiple drivers to grow the business. In addition to growing our footprint through acquisitions, we are driving change that can deliver stronger organic growth. Our strategy starts with our unique connection and relationship with the grower supported by our more than 3,600 agronomists and our leading digital platform. We deliver whole-acre solutions to enhance productivity, profitability and sustainability. The five key drivers for our organic growth are outlined below. 1 Proprietary Product Expansion 2 Optimize Assets 3 Digital 4 Nutrien Financial 5 Sustainability Growing our line of proprietary products Optimizing the US's largest Ag retail chain & distribution network Revolutionizing Ag retail with the leading integrated digital platform Building customized solutions that support customer retention and business growth Supporting growers in navigating challenges of ag sustainability We offer more than 2,000 proprietary products that contribute to significantly higher margins compared to third-party products. These products are often customized for specific growing regions and conditions, and include patented technologies. We develop these products at the more than 30 facilities dedicated to innovation, breeding and associated production. As the largest Ag retailer in our key markets, we target optimization throughout our network. We are creating pathways to drive efficiency in our cash operating coverage ratio, average working capital and adjusted EBITDA per US selling location. Nutrien Ag Solutions provides the leading digital tool set in retail agriculture that facilitates our grower customers and our agronomists to collaborate in new and unique ways that drive efficiency, convenience, and a better outcome in the field. We established aggressive goals on each key performance indicator, we are executing against those goals and we are closely monitoring our performance. The efficacy and efficiency of our digital platform is delivering tangible benefits that include improved customer loyalty and higher customer spend, all of which drive organic adjusted EBITDA growth. LEARN MORE Nutrien Digital video visit https://www.you tube.com watch?v=Swg 06_cjvno&feature=you tu.be We believe Nutrien is uniquely positioned to offer the industry's most comprehensive, end- to-end carbon program making it easy for growers to adopt sustainable, agronomic practices that aim to generate positive carbon outcomes, translating into additional earnings for our farmer customers. LEARN MORE Nutrien's Carbon Program https:// www.nutrien.com/ sustainability/ carbon-program We developed Nutrien Financial to formalize short-term financing we have historically offered to our customers through payment terms, making it easier and more convenient for them to access credit and to enhance our collection and credit risk management practices. We expect Nutrien Financial will deliver earnings through improved customer retention, loyalty and purchasing while creating direct revenue from finance arrangements. It also reduces our cost of debt through favorable credit rating considerations. LEARN MORE Retail Financial Performance p24 15 Nutrien Annual Report2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information A GLOBAL LEADER IN POTASH We are the largest soft rock miner and potash producer in the world, with unmatched competitive advantages. We operate a flexible network of six mines with 5 million tonnes of available capacity we expect to deploy as demand grows or as opportunities arise. We operate the most reliable, safe and efficient network of assets in the industry. Our available capacity is positioned to deploy strategically, and we are busy leveraging technology across our operations through our Next Generation Potash program. What is the Next Generation Potash program? This program is a series of initiatives targeted to enhance and improve production, from the mine face right through to the mill. The benefit from the collective program is larger than the sum of its parts, and focuses on two key pillars to drive value: SAFETY, COST EFFICIENCY & FLEXIBILITY ESG & SUSTAINABILITY The active mining face presents the single largest safety risk to our underground workers and we are implementing tele-remote and autonomous operations to remove them from that risk. We are empowering safety and value-driven decisions with real-time information supported by our digital capabilities, advanced process controls and smart planning to optimize our production process, increase production capabilities and lower production costs per tonne. We are also extending asset life by monitoring and predicting key equipment parameters and performance. The Next Generation Potash program is also expected to reduce the environmental footprint of our potash operations. The self-generation of power and thermal energy will reduce CO2 intensity and lower our cash production costs per tonne. At the same time, the use of advanced process control systems are expected to reduce natural gas consumption and leach water usage in the milling process. In addition, by using more of our existing available capacity, we will also reduce the per tonne consumption of energy and materials. As we enhance and improve our potash operations, Nutrien is committed to a fair transition into autonomous mining operations by evaluating the required transformation of our workforce. 100% ROCANVILLE MINING FLEET ENABLED TO RUN OPERATOR NOT PRESENT DURING SHIFT CHANGES (~3 HOURS) 2MINING MACHINES OUTFITTED WITH SURFACE REMOTE OPERATION CAPABILITIES AND AUTONOMOUS CONTROL AT LANIGAN ROCANVILLE SELF-GENERATED POWER UNDER CONSTRUCTION WITH OPPORTUNITY FOR FURTHER ROLL OUT IMPROVED SAFETY AND EFFICIENCY FROM DIGITAL INITIATIVES 16 Nutrien Annual Report2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information WELL POSITIONED NITROGEN OPERATIONS Nutrien has a leading Nitrogen business with strategically advantaged assets and an opportunity to further optimize our business. In addition to improving ammonia operating rates and enhancing safety and reliability, we have also invested to lower GHG emissions and expand our product mix. REDUCING GHG EMISSIONS BLUE/LOW CARBON AMMONIA ENVIRONMENTALLY SMART PRODUCTS For Nutrien, nitrogen production represents more than three-quarters of our total scope 1 & 2 emissions, which is why we are focused on reducing that footprint. We have several projects underway that are expected to reduce the carbon footprint of our nitrogen operations. Construction began on abatement projects totaling $50 million, that are expected to reduce CO2 equivalent emissions by over 1 million tonnes by 2023, equating to an approximate 7 percent reduction in our company wide scope 1 & 2 emissions. Further, we have several other projects that will reduce our overall emission intensity. Nutrien is one of the world’s largest blue/low carbon ammonia producers. We capture CO2 at our Redwater and Geismar facilities, and sell it for industrial applications or permanently store it in large-scale carbon capture facilities. We also produce low carbon ammonia at our Joffre plant which uses hydrogen as a feedstock. This process significantly lowers the GHG intensity per tonne of ammonia compared to a typical steam methane reforming process. In 2020, we captured approximately 1 million tonnes of CO2 equivalent with the capability to produce approximately 1 million tonnes of blue/low carbon ammonia. Nutrien produces and sells a wide- portfolio of products that minimize nitrogen loss, maximizes nitrogen utilization and reduces emissions. We produce and sell over 400,000 tonnes of Environmentally Smart Nitrogen (“ESN”) annually. This urea granule is contained within a flexible polymer coating which reduces nitrogen loss, and releases nitrogen at a rate matched with crop uptake. We also produce and sell approximately 600,000 tonnes of diesel exhaust fluid (“DEF”) which is a urea liquid solution that, when combined with diesel in larger vehicles and machinery, can improve fuel efficiency and reduce emissions. Transporting ammonia then extracting its hydrogen can be a lower-risk and lower carbon alternative to transporting hydrogen, which can then be used in applications such as fuel cells. We are pursuing opportunities to leverage our low-cost ammonia production profile and strategically advantaged assets to be at the forefront of this developing market. ~1 MMT BLUE/LOW CARBON AMMONIA PRODUCTION CAPABILITY >2 MMT CO2 CAPTURED INCLUDING BY PROJECTS IN CONSTRUCTION ~1 MMT ENVIRONMENTALLY SMART PRODUCTS SOLD IN 2020 17 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information CAPITAL ALLOCATION Nutrien is focused on creating long-term value through capital allocation. We have growth and other value generating project options across our integrated business model and comprehensive product and service offering. Our capital allocation policy prioritizes sustaining our assets, preserving the strength and resiliency of our balance sheet, supporting a sustainable and growing dividend, and applying a rigorous compete-for-capital reinvestment strategy to maximize shareholder value. NUTRIEN CAPITAL ALLOCATION POLICY Sustaining Our Industry Leading Asset Base The first priority is to sustain our assets to ensure we have safe and reliable operations to grow cash generation. Maintain Strong Balance Sheet Our balance sheet is built on two principles: securing reliable access to low-cost debt and preserving sufficient liquidity through our operating cycle. Sustainable & Growing Dividend Supported by Retail Stability We are focused on delivering a stable and growing dividend. This is core to our capital allocation policy. Nutrien’s dividend provided an average yield of 4.6 percent in 2020, and has been increased three times to $0.46, and by a total of 15 percent over the previous three years. Investment Funds Allocated on a Compete- for-Capital Basis 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, including evaluating against share repurchases. 18 Nutrien Annual Report2020OPERATING SEGMENT PERFORMANCE & OUTLOOK WE REPORT OUR RESULTS IN FOUR REPORTABLE OPERATING SEGMENTS: NUTRIEN AG SOLUTIONS (“RETAIL”), POTASH, NITROGEN AND PHOSPHATE. • In 2020, we revised the measure with which we evaluate our segments from EBITDA to adjusted EBITDA. Adjusted EBITDA provides a better indication of the segment’s performance as it excludes the impact of non-cash impairments and other costs that are centrally managed by our corporate function. We have presented adjusted EBITDA for the comparative period. Refer to Note 3 to the financial statements for details. • 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. 19 Nutrien Annual Report2020NUTRIEN AG SOLUTIONS (“RETAIL”) 10% TOTAL RETAIL ADJUSTED EBITDA/SALES $1.08M ACHIEVED 2020 TARGET OF $1M OF RETAIL ADJUSTED EBITDA PER US SELLING LOCATION >$500M EXPECTED ANNUAL NORMALIZED RUN-RATE REVENUE ACHIEVED IN BRAZIL (2021) >$1.2B DIGITAL PLATFORM RETAIL SALES 20 Nutrien Annual Report 2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other InformationOverview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information RETAIL OPERATING ENVIRONMENT R Our Business Nutrien Ag Solutions is the world’s largest retailer of crop inputs and services. We are the leading provider of whole-acre solutions across North America, South America and Australia, helping farmers grow crops more efficiently, profitably and sustainably. We operate over 2,000 retail locations across the US, Canada, Australia and South America, with approximately 1,200 locations in the US alone. The strength of our network ensures we can deliver whole-acre solutions when our grower customers need them. We have over 3,600 agronomists and field experts, working directly with our customers to provide advice and support from the crop planning stage right through to harvest. They help growers to optimize crop yields, maximize returns and improve on sustainability practices. Our award-winning Nutrien Ag Solutions digital platform has become the leading platform in Ag retail, which helps to foster a trusted relationship with our grower customers by providing insight, value-add solutions and convenience. Our agronomists can collaborate in a new and unique way that delivers better grower outcomes and drives value for Nutrien. We produce over 2,000 proprietary products that span the crop input chain, including seed, crop nutrients and crop protection, including a portfolio of specialty products that enhance sustainability practices. Our proprietary products deliver superior margins compared to third-party products and we produce and distribute from over 30 formulations facilities located in all key markets where we operate. Nutrien recently unveiled a revolutionary end-to-end agricultural Carbon Program that leverages our unique and direct relationship with the grower to agronomic expertise, digital capabilities and our supply chain. By combining these critical building blocks we believe our Carbon Program will enable us to scale sustainability outcomes for the grower by increasing productivity and monetizing improved carbon performance. Competitive Landscape The Ag retail industry is highly fragmented in most of our major markets, with a variety of ownership structures and varying degrees of access to capital. The major markets where we operate are primarily comprised of many small Ag retailers along with a small number of mid-sized competitors. In the US, cooperatives of various sizes are also prominent. We believe scale and size will be required in the future in order to meet evolving grower needs. Growers want whole-acre solutions In Brazil, the market is characterized that can include a full suite of by small to medium-sized products, services and solutions, independent owners and represents rooted in sound unbiased agronomic an opportunity for larger retailers, advice and analytics, stressing the including Nutrien, to enhance the importance of timely delivery and product, service and solution offerings reliability of supply. to growers. 21 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information Our Strategy We are building and enhancing trusted relationships with our grower customers by creating the leading channel that provides whole-acre solutions. Our position as the leading Ag Drive Organic Growth: Our organic strategy continues to add value as retailer with a local presence, world- growth strategy focuses on five key we access new customers, further class supply chain and portfolio of pillars that are intended to drive the expand our proprietary solutions comprehensive solutions creates an transformation of Ag retail, offer value and integrate the business with our advantageous position for Nutrien added solutions for growers and world-class supply chain network. Ag Solutions to continue to perform deliver efficiency and optimization We are also growing our business in and grow. Our strategy is focused on throughout our network. Brazil and we continue to execute in driving organic growth by delivering additional value to our customers, becoming more efficient and offering value-added products and services. We also intend to grow through strategic acquisitions. LEARN MORE Nutrien Ag Solutions p15 Execute on Accretive Acquisitions: Nutrien Ag Solutions has a solid track record of growing in key markets and helping to consolidate the fragmented retail industry. Our tuck-in acquisition this significant and strategic market. We established a corporate office and leadership team in country, where we intend to continue to grow the business and bring to market whole-acre, digital and sustainability solutions, similar to our other more mature markets. 2020 Performance Nutrien Ag Solutions demonstrated growth, resilience and stability in the face of global volatility, achieving record adjusted EBITDA and record crop nutrient sales volumes. In addition to achieving record and uptake of our digital capabilities acquisition, which closed in late 2019. adjusted EBITDA in 2020, we was very apparent. Our award- We achieved our targeted annual improved our adjusted EBITDA winning digital platform experienced run-rate synergies of $30 million well margins as a result of double-digit significant acceleration of adoption ahead of schedule, and identified organic growth, strong proprietary and usage in 2020, surpassing $1.2 an additional $20 million of run-rate product sales and ongoing billion in sales and representing 11 synergies that we expect to capture optimization of our network. We percent of total Retail sales in North by the end of 2021. lowered Retail adjusted average America. We expect to expand the working capital to sales by nearly breadth of the platform to offer nearly $900 million, resulting in a 15 percent all of our products and services in ratio and well below our 2023 2021. We will also be adding new target. We also improved our Retail functionalities to the platform such cash operating coverage ratio and as field planning enhancements, increased Retail adjusted EBITDA per precision Ag capabilities and US selling location to over $1 million. expansion into Brazil and Australia. We also closed two acquisitions in Brazil in 2020, Agrosema Comercial Agricola Ltda. (“Agrosema”) and Tec Agro Group. Our annual revenues in Brazil are expected to surpass $500 million on a run-rate basis in 2021, well on our way to reaching our target of $1 billion in revenues in Brazil We adapted quickly and effectively 2020 represented the first full by 2023. to COVID-19 risks, where the value year of earnings from the Ruralco 22 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information PROPORTION OF DIGITAL PLATFORM SALES1,2 (percent) 11% DIGITAL PLATFORM SALES1 ($ millions) $1,211 2% $260 20193 2020 20193 2020 Source: Nutrien 1 Represents North America results. 2 North American digital Retail sales as a proportion of total North American Retail sales. 2019 has been restated to align with how we calculated this measure in 2020. 3 The launch of the platform was in March 2019. US GROWER CASH PRODUCTION MARGINS (US$/acre) US Corn Prices (US$/bushel) $4.31 $4.51 $3.82 US Soybean Prices (US$/Bushel) $11.82 $9.40 $10.66 R $450 $360 $270 $180 $90 $0 10-Year Avg 3-Year Avg 2021 Forecast1 10-Year Avg 3-Year Avg 2021 Forecast1 Source: CRU, Fertecon, USDA, Bloomberg, Nutrien 1 2021F numbers are the December 2021 corn and November 2021 soybean futures contracts as of February 16, 2021. 2020 MARKET CONDITIONS MARKET OUTLOOK Key crop prices surged in the second half of 2020 driven We expect a rebound in US planted crop acreage will by very tight global supply and demand fundamentals. support increased crop input demand in 2021. Growing conditions in North America improved Assuming normal planting conditions in the US in the considerably in 2020 relative to the 2019 season, however, spring of 2021 and continued favorable crop margins, we the US had prevented planting of about 10 million acres, expect planted acreage of major US crops will increase which is approximately twice the historic average. In by approximately 10 million acres. US farmers were able addition, the Derecho windstorm in the MidWest resulted to make excellent progress on fertilizer applications in the in significantly lower than expected production of US corn fall of 2020, and with the expected increase in acreage and soybeans. These factors and relatively low crop prices and strong crop prices, we expect growth in crop input resulted in lower than expected crop input spending during expenditures in 2021. the summer period. The outlook for Australia is also strong as precipitation The combination of lower than expected production and remained good in major Eastern growing regions. Growers the record pace of Chinese grain and oilseed imports in benefited from higher global crop prices for their 2020 2020 resulted in US ending stocks for corn and soybeans crop and, weather permitting, the outlook for crop input projected to be at their lowest levels in six years, according demand remains strong for 2021. In Brazil, growers are to the USDA. This caused corn and soybean prices to rally harvesting what is expected to be a record soybean crop, in late 2020 and early 2021 to their highest levels in at least despite late planting and dry weather. We anticipate strong seven years. Following several seasons of drought, Australian growers received much needed precipitation in 2020, resulting in a 76 percent increase in winter crop production. The increased planted area supported increased demand for crop inputs. While in Brazil, growers responded to strong crop prices by increasing soybean planting in the fall of 2020, despite less than ideal weather. planted acreage and crop input demand in 2021, although there is some risk to the upcoming Safrinha corn plantings given the slower than usual soybean crop process. 23 Nutrien Annual Report2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information RETAIL FINANCIAL PERFORMANCE (millions of US dollars, except as otherwise noted) Sales Crop nutrients Crop protection products Seed Merchandise Nutrien Financial Services and other 1 Nutrien Financial elimination 2 Cost of goods sold Gross margin Expenses 1,3 Earnings before finance costs and taxes (“EBIT”) Depreciation and amortization EBITDA/Adjusted EBITDA Dollars Gross Margin Gross Margin (%) 2020 2019 % Change 2020 2019 % Change 2020 2019 1,130 1,303 363 157 129 774 (120) 3,736 1,032 1,173 336 109 – 651 – 3,301 9 11 8 44 n/m 19 n/m 13 22 23 20 17 100 62 100 25 21 24 20 18 n/m 65 n/m 25 5,200 5,602 1,790 943 129 1,241 (120) 14,785 11,049 3,736 2,974 762 668 1,430 4,989 4,983 1,712 598 – 1,000 – 13,282 9,981 3,301 2,665 636 595 1,231 4 12 5 58 n/m 24 n/m 11 11 13 12 20 12 16 1 Certain immaterial figures have been reclassified for the year ended December 31, 2019. 2 Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches. 3 Includes selling expenses of $2,795 million (2019 – $2,484 million). The most significant contributors to the changes in our Retail financial performance were as follows: Crop nutrients Crop protection products Seed Merchandise Nutrien Financial Services and other Selling expenses Adjusted EBITDA 2020 vs 2019 Sales and gross margin increased in 2020 as higher global sales volumes more than offset the impact of lower selling prices. 2019 sales volumes in North America were negatively impacted by extreme weather. Gross margin percentage increased due to a larger proportion of higher-margin proprietary product sales. Sales and gross margin increased in 2020 primarily due to strong market share growth from contributions of our Ruralco acquisition and increased applications in the US. Gross margin percentage decreased by 0.3 percentage points compared to 2019 due to change in regional mix, with greater sales in lower-margin regions outside of the US. Sales and gross margin increased in 2020 due to contributions from the Tec Agro Group and Agrosema acquisitions in Brazil and Ruralco in Australia. Gross margin percentage was relatively flat as a one percentage point gain in the US was offset by the growth in Australia where margins are lower. Sales and gross margin increased in 2020 while gross margin percentage decreased due to strong demand in Australia and the related change in product sales mix. This was the first full year of operations for the Nutrien Financial business. Sales and gross margin increased in 2020, while gross margin percentage decreased, despite the increased sales and gross margin in Australia, where percentage margins are lower than in North America. Expenses increased in 2020 due to higher sales from acquisitions and from strong organic growth while expenses as a percentage of sales remained relatively flat. Adjusted EBITDA was higher in 2020 primarily due to higher sales volumes from acquisitions and from organic growth more than offsetting the impact of lower prices. 24 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information SELECTED RETAIL MEASURES Proprietary products margin as a percentage of product line margin (%) Crop nutrients Crop protection products Seed All products All products before reclassification 1 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 R 2020 25 32 46 22.9 23.3 9,746 2,986 12,732 421 367 408 99 55 89 2019 23 34 38 23.3 23.7 8,812 2,236 11,048 465 398 452 102 60 93 1 Adjusted to reflect what the metric would have been prior to a reclassification of certain immaterial figures. Financial performance measures 2020 Target 2020 Actuals 2019 Actuals Retail adjusted EBITDA to sales (“Retail adjusted EBITDA margin”)(%) 1,2 Retail adjusted average working capital to sales (%) 1,2 Retail adjusted average working capital to sales excluding Nutrien Financial (%) 1 Retail cash operating coverage ratio (%) 1,2 Retail cash operating coverage ratio before reclassification (%) 1,3 Retail adjusted EBITDA per US selling location (thousands of US dollars) 1 Retail normalized comparable store sales (%) Retail digital platform sales to total sales (%) 4 Retail grower engagement (%) 5 Nutrien Financial net interest margin (%) 1 10 21 61 1,000 10 15 5 61.8 61.1 1,075 6 11 10 5.3 9 23 n/a 62.9 62.2 967 (1) 2 5 n/a 1 Rolling four quarters ended December 31, 2020 and December 31, 2019 respectively. 2 2019 has been restated due to certain reclassification of immaterial figures. 3 Adjusted to reflect what the metric would have been prior to a reclassification of certain immaterial figures. 4 Grower and employee orders directly from the digital platform as a percentage of total sales in North America. 2019 has been restated to align with the 2020 calculation. 5 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 field plan. NUTRIEN FINANCIAL We offer flexible financing solutions to our customers in support of Nutrien’s agricultural product and service sales. Qualifying retail customers in the United States and Australia are offered extended payment terms, typically up to one year, to facilitate the alignment of grower crop cycles with cash flows. Nutrien Financial revenues are primarily earned through interest and service fees that are charged to our Retail branches or directly to our customers. We hold a significant portion of receivables from customers that have historically experienced a low-default rate. We manage our credit portfolio based on a combination of review of customer credit metrics, past experience with the customer and exposure to any single customer. Nutrien Financial, which is a wholly owned finance captive, monitors and services the portfolio of our high- quality receivables from customers that have the lowest risk of default among Retail’s receivables from customers. We monitor the results of this portfolio of receivables separately because we calculate the cost of capital attributable to the high-quality receivables from customers differently from our other receivables. Specifically, we assume a debt to equity ratio of 7:1 in funding Nutrien Financial receivables, based on the underlying credit quality of the assets. Nutrien Financial relies on corporate capital for funding. We estimate the deemed interest expense using an average borrowing rate of 3.72 percent applied to the notional debt required to fund the portfolio of receivables from customers monitored and serviced by Nutrien Financial. The balance of our Retail receivables (outside of Nutrien Financial) are subject to marginally higher credit risk. As at December 31, (millions of US dollars) North America International Nutrien Financial receivables 2 Current 962 178 1,140 <31 days past due 31-90 days past due >90 days past due Gross Receivables Allowance 1 2020 Total 2019 Total 130 2 132 44 16 60 38 47 85 1,174 243 1,417 (24) (1) (25) 1,150 242 1,392 821 – 821 1 Bad debt expense on the above receivables was $26 million (2019 – $5 million) in the Retail segment. 2 Includes $1,147 million (2019 – $762 million) of very low risk of default and $270 million (2019 – $64 million) of low risk of default. 2020 Nutrien Annual Report 25 POTASH 12.8MMT POTASH SALES VOLUMES $59POTASH CASH COST OF PRODUCT MANUFACTURED PER TONNE +5MMT AVAILABLE CAPACITY 2626 Nutrien Annual Report 2020 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information POTASH OPERATING ENVIRONMENT K Our Business Nutrien is the best positioned company to continue to create value in the potash industry due to its size, high-quality and low-cost network of mines and flexible growth optionality. Our extensive mine network We have 5 million tonnes of available and our stake in Canpotex ensures provides for decades of reliable and potash capacity that we expect to efficient and effective marketing safe production at a first-quartile deploy over time as global demand and delivery of potash to over cost profile, and places us as the grows, a characteristic that is unique 40 international markets. world’s largest potash producer with to Nutrien. approximately 21 percent of global potash capacity. In addition, we have line of sight to Nutrien’s culture and actions to 5 million tonnes of incremental and we are proud to operate one Safety is of paramount importance Nutrien’s Potash network is one of the brownfield expansions which can be of the safest potash operations in lowest cost, most reliable and highest brought online at a much lower cost the world. This is made possible by quality in the world. We have six and much more quickly than any new our investment in maintaining our mines as part of a diverse and flexible greenfield mine being contemplated production network, decades of network that allows us to optimize in the industry today. We have an developing best practices in potash our assets to cost-effectively position extensive distribution system to mining and the adoption of the right tonnes at the right time. service the North American market, new technologies. Competitive Landscape A limited number of countries around the world possess a significant quantity and quality of potash. Canada has the largest known global potash reserves, accounting for approximately 40 percent of the total. More than 70 percent of the world’s is an important difference between 2015, with the expectation of an potash capacity is held by the six potash and other major crop nutrient additional 5 million tonnes of new largest producers. Our primary industries. Trade typically accounts demand added by 2023. competitors are located in Russia, for approximately three-quarters of Belarus, Canada, Germany, Israel demand for potash resulting in a and Jordan. globally diversified marketplace. This growth is driven by increasing nutrient requirements of higher yielding crops and improving soil Most major potash consuming The global demand growth rate fertility practices, particularly in countries in Asia and Latin America for potash has outpaced that of emerging markets where potash has have limited or no indigenous other primary nutrients, averaging been historically under-applied and production capability and rely on approximately 2.4 percent cumulative crop yields lag. imports to meet their needs. This annual growth rate (“CAGR”) since 27 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information Our Strategy Nutrien has a unique position in the potash industry. We will use our extensive network to respond quickly and efficiently to market supply and demand dynamics, while we continue to incorporate new technologies to lower our production costs and optimize our asset base. Incremental capacity: We will use Next Generation Potash: We are Network optimization: We are our production platform, which investing in initiatives focused on focused on achieving the optimal includes 5 million tonnes of additional leveraging automated and tele- production mix from our world-class available capacity, to grow as the remote mining and other digital platform, which maintains production leader in the potash industry. We technologies to continue to improve flexibility while maximizing the will deploy this capacity as demand our safety performance, lower benefits of our low-cost position grows and serve tonnes into the our production costs and reduce on the cost curve and a leading market when required. In addition, we emissions. These improvements are domestic and offshore distribution have line of sight to 5 million tonnes being made from the mine face right network including our own integrated of incremental brownfield capacity through to the mill. business. At the same time, we will 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. LEARN MORE Next Generation Potash p16 undertake preventative maintenance to ensure the high-quality, reliability and safety of our operations. 2020 Performance We continue to enhance our network by effectively managing our production and supply chain and optimizing volumes to minimize production costs. Nutrien sold 12.8 million tonnes network of mines and exceptional control of mining machines. of potash in 2020, up more than commitment from our people Predictive maintenance, value driven 1 million tonnes over 2019, ensured that we were able to produce planning and scheduling and real- highlighting the flexibility of our potash at targeted levels without time connection of our workforce network and ability to move tonnes sacrificing quality, value or safety. moved in lockstep to begin to unlock into the market when needed. We also reduced our cash COPM to $59 per tonne, the lowest level on record for Nutrien. This was despite a fire at our Vanscoy mine loadout facility and navigating the nuances of underground mining during the COVID-19 pandemic. Our strong We continued to progress our the full value of the program. Next Generation Potash program. We took additional steps earlier Rocanville’s mining fleet is now this year to optimize our network able to run operator-not-present by shifting production tonnes from during shift change, and Lanigan our higher-cost Vanscoy site to has successfully piloted clay seam other lower cost operations within detection using artificial intelligence our network. which will allow for autonomous 28 Nutrien Annual Report2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information POTASH MANUFACTURED PRODUCT SALES VOLUMES (million tonnes) 2021 Potash Sales Volume Guidance Range 11.7 13.0 11.5 12.8 12.5-13.0 US MIDWEST FOB POTASH PRICE ($/tonne) $392 $277 $310 $333 $280 $350 K 20171 2018 2019 2020 2021F2 Source: Nutrien 1 2017 represents the historical combined results of PotashCorp and Agrium. 2 Based on potash manufactured product sales volume guidance as provided on February 17, 2021. 10-Year Avg (2011-2020) Source: CRU 2017 2018 2019 2020 Year-to-Date Feb 11, 2021 2020 MARKET CONDITIONS MARKET OUTLOOK Demand for potash fertilizers was excellent in 2020 despite the COVID-19 pandemic, largely supported by higher crop prices and improved agricultural fundamentals in key markets. We expect the robust potash consumption trend will continue in 2021 supported by favorable crop economics, high affordability levels for farmers around the world and limited inventory build in major markets. Deliveries to the North American market increased by about 1.5 million tonnes in 2020, supported by favorable application conditions, particularly during the extended fall application season, and strengthening in crop prices. Brazil imported record volumes of potash in 2020 supported by favorable crop economics. While palm oil prices increased dramatically in the second half of 2020, potash demand growth in Southeast Asia remained relatively limited especially in Malaysia, where plantations continue to struggle with COVID-19 related restrictions and labor shortages. Import demand in both China and India was strong particularly in the second half of the year following the contract settlements in the second quarter of 2020, underpinned by tightened agricultural fundamentals. Potash prices were pressured in many key spot markets during the first half of the year, however, prices increased steadily in the second half as the demand outlook continued to improve and outpaced new capacity additions from the Former Soviet Union (“FSU”) region. Despite strong shipments in North America in 2020, we believe almost all the potash delivered was applied to ground, leading to very tight inventories throughout the supply chain at the end of the year. Low inventories combined with favorable crop prices and planting outlook, should support strong potash demand in 2021. In Brazil, growers continue to be incentivized to invest and secure fertilizer needs for the 2021 soybean growing season. Shipments to Southeast Asian countries are expected to increase from 2020 levels, supported by a significant improvement in palm oil prices and a more normalized labor supply situation. Potash consumption in India is expected to remain strong in 2021, while import growth can be subject to potential policy changes. In China, the agronomic need for higher potash application rates is well-known and domestic agricultural fundamentals are robust. India and China each settled a 2021 potash agreement with one supplier at price levels below what we considered to be reflective of market conditions. It is unclear how these agreements will impact potential contracts with other global potash suppliers. Global potash producers are well-positioned for much of the first half of 2021, despite not having contracts with China and India, and suppliers such as Canpotex have not placed volumes into those markets ahead of new contracts. We forecast global potash shipments will be 68 to 70 million tonnes in 2021. We also project new supply additions will be limited in 2021, mostly from the FSU. With an expected increase in demand from key markets, we anticipate global potash market will be balanced to tight in 2021. 29 Nutrien Annual Report2020Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information POTASH FINANCIAL PERFORMANCE (millions of US dollars, except as otherwise noted) Manufactured product Net sales North America Offshore Cost of goods sold Gross margin – manufactured Gross margin – other 1 Gross margin – total Expenses 2 EBIT Depreciation and amortization EBITDA Impairment of assets Adjusted EBITDA Dollars Tonnes (thousands) Average per Tonne 2020 2019 % Change 2020 2019 % Change 2020 2019 % Change 908 1,238 2,146 1,183 963 – 963 248 715 452 1,167 23 1,190 978 1,625 2,603 1,103 1,500 1 1,501 298 1,203 390 1,593 – 1,593 (7) (24) (18) 7 (36) (100) (36) (17) (41) 16 (27) n/m (25) 4,815 8,009 4,040 7,481 12,824 11,521 19 7 11 Depreciation and amortization Gross margin excluding depreciation and amortization – manufactured Potash cash cost of product manufactured 189 155 167 92 75 35 242 217 226 96 130 34 (22) (29) (26) (4) (42) 3 110 164 (33) 59 63 (6) 1 Includes other potash and purchased products and is comprised of net sales of $Nil (2019 – $1 million) less cost of goods sold of $Nil (2019 – $Nil). 2 Includes provincial mining and other taxes of $201 million (2019 – $287 million). The most significant contributors to the changes in our Potash financial performance were as follows: 2020 vs 2019 Sales volumes North America and Offshore sales volumes increased in 2020 due to strong offshore demand, higher US planted acreage and strong fall application in North America in anticipation of higher planting in 2021. Net realized selling price Average selling prices decreased in 2020 due to lower global benchmark prices compared to 2019. Cost of goods sold per tonne Costs decreased in 2020 due to efficiency gains, higher production tonnes and favorable changes in mine production mix. Provincial mining and other taxes Adjusted EBITDA We are subject to Saskatchewan provincial resource taxes, including the potash production tax and the resource surcharge. Expenses decreased in 2020 primarily due to lower average potash selling prices, which are the basis for certain taxes. Adjusted EBITDA decreased in 2020 primarily due to lower net realized selling prices, which was partially offset by higher volumes of product sold, lower cash cost of goods sold per tonne and lower provincial mining and other taxes. 30 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information CANPOTEX SALES BY MARKET (percentage of sales volumes except as otherwise noted) 2020 2019 Change Latin America Other Asian markets 1 China India Other markets 1 All Asian markets except China and India. 32 25 22 14 7 31 27 22 10 10 1 (2) – 4 (3) K POTASH PRODUCTION (million tonnes KCI) Rocanville Potash Allan Potash Vanscoy Potash Lanigan Potash Cory Potash Patience Lake Potash Total Shutdown weeks 3 Operational Capability 2 Production 2021 2020 2020 2019 Nameplate Capacity 1 6.5 4.0 3.0 3.8 3.0 0.3 5.4 2.8 0.8 2.5 1.6 0.3 5.4 2.8 1.7 2.3 1.0 0.3 20.6 13.4 13.5 5.29 2.79 0.51 2.33 1.40 0.27 12.59 38 5.14 2.18 1.42 1.75 0.97 0.24 11.70 55 1 Represents estimates of capacity as at December 31, 2020. 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 the beginning of the year, and may vary during the year, and year-to-year, including between our facilities). 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. 2020 Nutrien Annual Report 31 NITROGEN 11MMT RECORD MANUFACTURED PRODUCT SALES VOLUMES ~1MMT BLUE/LOW CARBON AMMONIA PRODUCTION CAPABILITY 93% AMMONIA OPERATING RATE (excludes Trinidad and Joffre) 32 Nutrien Annual Report 2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information NITROGEN OPERATING ENVIRONMENT N Our Business Nutrien has a large and diverse nitrogen portfolio, reinforced by a number of unique strategic advantages. We operate nine nitrogen facilities the world and represent approximately serve the growing agricultural markets across North America and Trinidad 80 percent of our total nitrogen in South America. producing key nitrogen products sales volume. We have an extensive and with an ammonia capacity network of almost 200 terminals and of 7.1 million tonnes. Our sales warehouses with over 1.3 million portfolio represents a well-balanced tonnes of storage capacity, providing combination of agricultural and the ability to place product and service industrial products, providing customers very efficiently. One of Nutrien’s strategic priorities is to be a leader in sustainability in the agricultural sector. We have made investments to reduce the carbon footprint associated with our nitrogen production including flexibility to optimize our product mix during changing market conditions. Agriculture sales represent approximately 60 percent of our nitrogen sales. Our Trinidad operations are increasing blue/low carbon ammonia advantageously situated on tide water, production capability. We also have where we deliver to approximately many nitrogen-based fertilizer 30 countries, with a focus on products that provide an innovative industrial end markets. Gas costs and effective role in reducing Our North American operations in Trinidad are primarily indexed to farming’s environmental footprint, are situated in market, providing a ammonia prices, which provides including our proprietary slow release selling and delivery advantage. The margin stability. We also have an environmentally smart nitrogen. operations have access to some of the investment in a world-scale nitrogen lowest cost natural gas feedstock in facility in Argentina, which fits well to 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 The US remains one of the largest expanded industry opportunity close to the regions in which it is importers of nitrogen and a key driver as we look for more efficient and produced due to the high cost of of global trade despite a significant environmentally friendly production transportation, whereas urea and increase in domestic capacity and methods and application of nitrogen solutions are more widely production over the past few years. nitrogen products. transported and traded. We compete In developed regions of the world, with other producers in Canada, the US and several offshore suppliers. nitrogen producers are focused on reducing CO2 emissions. This has 33 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information Our Strategy Nutrien is growing the nitrogen business through network optimization and strategic capacity expansion. We are also enhancing our competitive cost position and expanding our product portfolio. Reliability, efficiency and integrated model that includes our capacity at a fraction of the cost productivity: We are investing in Retail business. LEARN MORE Well Positioned Nitrogen Operations p17 Brownfield capacity expansion: We are growing and improving the position of our assets through low risk, high-return projects that enhance our product mix, improve our energy efficiency and expand our North of a greenfield plant and the long- term potential for producing green ammonia. Sustainability leader: We are reducing the carbon footprint of our nitrogen operations through energy efficiency, carbon capture and CO2 abatement initiatives. We are also expanding our portfolio of sustainable products including blue/low carbon American capacity. We are evaluating ammonia, ESN and DEF. potential nitrogen projects that include 700,000 tonnes of additional short-payback projects that improve safety, increase production and improve efficiency. In addition to higher production levels, these initiatives minimize production costs and provide a safe environment for our employees. We will continue to optimize our Nitrogen network to best leverage the production flexibility of our low-cost facilities and our extensive distribution network, capitalizing on the benefits of our 2020 Performance We set a historical record for manufactured nitrogen sales volumes of 11 million tonnes while achieving the best safety performance on record despite the lower global nitrogen demand in 2020. We achieved record sales volumes product capacity by approximately in 2020, while maintaining flexibility in nitrogen in 2020, despite impacts 1 million tonnes between 2018 to respond to improvement in that COVID-19 had on industrial and 2021 at a total estimated cost market conditions. demand. Optimization initiatives in of $330 million. These projects also our production network contributed increase production efficiencies to our ammonia operating rate and reduce emissions throughout increasing to 93 percent, while our our network. The cost of these ammonia controllable cash cost of projects is significantly lower and product manufactured decreased by quicker to bring online than $2 per tonne. greenfield economics. We continued to advance on multi- Due to historically low global year brownfield projects that are ammonia prices we curtailed expected to increase total gross production at our Trinidad facility Sales of our ESN and DEF products in 2020 grew by 8 percent and we captured approximately 1 million tonnes of CO2 equivalent. 34 Nutrien Annual Report2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information NITROGEN MANUFACTURED PRODUCT SALES VOLUMES (million tonnes) 2021 Nitrogen Sales Volume Guidance Range 10.2 10.6 10.3 11.0 10.9-11.4 US NOLA FOB UREA PRICE ($/tonne) $334 $348 $285 $270 $250 $228 N 20171 2018 2019 2020 2021F2 Source: Nutrien 1 2017 represents the historical combined results of PotashCorp and Agrium. 2 Based on nitrogen manufactured product sales volume guidance as provided on February 17, 2021. 10-Year Avg (2011-2020) Source: CRU 2017 2018 2019 2020 Year-to-Date Feb 11, 2021 2020 MARKET CONDITIONS MARKET OUTLOOK Despite lower nitrogen demand for industrial use in The combination of higher energy prices, improved 2020, we estimate fertilizer demand for agricultural use global industrial nitrogen demand, coupled with strong in 2020 was the strongest in several years, despite the crop prices and robust fertilizer demand growth, should COVID-19 pandemic. support the nitrogen market in 2021. Lower global energy prices in the first three quarters of 2020 reduced nitrogen production costs in many regions, particularly in Europe and China. This, combined with weaker industrial demand due to reduced industrial activity and the global economic decline, resulted in lower nitrogen prices, particularly for ammonia in the first half of 2020. However, later in 2020 and into early 2021 we have seen higher energy prices in key producing regions, an improved agricultural outlook, combined with recovering industrial demand all of which supported global nitrogen markets. Meanwhile, production curtailments and outages, particularly in Trinidad, further contributed to tightened ammonia supply and demand fundamentals. Strong urea import demand in India, totaling 10.3 million tonnes in 2020, played an essential role in supporting world urea markets. Brazil also imported record volumes of urea in 2020 of 7.1 million tonnes. Chinese urea exports were limited throughout much of the year by strong domestic fertilizer demand and limited exportable surplus, but the pace increased later in the year in response to strong global demand, resulting in exports of 5.5 million tonnes in 2020. European gas and global liquified natural gas prices have increased and the forward gas price curve indicates a significantly higher seasonal bottom in 2021 than 2020, which should lift global nitrogen production costs, particularly in Europe. In China, natural gas supply shortages and increasing coal prices are also expected to increase costs compared to historically low levels in 2020. In the US, higher plantings, a positive outlook for the spring application season and significantly lower offshore imports supported urea prices entering 2021. Despite the potential for increased domestic urea production, we believe India will maintain imports between 9 and 10 million tonnes in 2021. We expect that Chinese urea exports will decline in 2021 to between 3 and 5 million tonnes as domestic demand remains strong, supported by robust agricultural fundamentals and more stringent environmental regulations which are likely to reduce exportable supplies. While we expect some urea projects to come online in the second half of 2021, recent history suggests that some projects are likely to be delayed. Given the slower pace of projects anticipated to come on stream after 2021, we expect demand growth will outpace capacity additions in the next few years. We expect global energy prices to increase in 2021 relative to 2020 and for North American natural gas price discounts to widen relative to other markets. 35 Nutrien Annual Report2020Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NITROGEN FINANCIAL PERFORMANCE (millions of US dollars, except as otherwise noted) Manufactured product Net sales Ammonia Urea Solutions, nitrates and sulfates Cost of goods sold Gross margin – manufactured Gross margin – other 1 Gross margin – total Income 2 EBIT Depreciation and amortization EBITDA Adjustments 2 Adjusted EBITDA Dollars Tonnes (thousands) Average per Tonne 2020 2019 % Change 2020 2019 % Change 2020 2019 % Change 621 933 668 2,222 1,804 418 57 475 (225) 700 599 1,299 (219) 1,080 743 932 706 2,381 1,749 632 68 700 (4) 704 535 1,239 – 1,239 (16) – (5) (7) 3 (34) (16) (32) n/m (1) 12 5 n/m (13) 2,778 3,475 4,713 10,966 2,971 3,037 4,262 10,270 (6) 14 11 7 Depreciation and amortization Gross margin excluding depreciation and amortization – manufactured Ammonia controllable cash cost of product manufactured 224 268 142 203 165 38 55 93 43 250 307 166 232 170 62 52 114 45 (10) (13) (14) (13) (3) (39) 6 (18) (4) 1 Includes other nitrogen (including ESN® and Rainbow) and purchased products and is comprised of net sales of $518 million (2019 – $467 million) less cost of goods sold of $461 million (2019 – $399 million). 2 The adjustments consist primarily of the net gain on disposal of investment in MOPCO, which was recorded in other income. See Note 3 to the financial statements. The most significant contributors to the changes in our Nitrogen financial performance were as follows: Sales volumes Net realized selling price Cost of goods sold per tonne Income Adjusted EBITDA 2020 vs 2019 Sales volumes increased in 2020 due to recent expansion projects and strong operating rates at our North American facilities. Ammonia sales volumes decreased slightly due to reduced industrial demand and a plant closure in Trinidad. Our average selling price for nitrogen products decreased in 2020 due to lower global and North American benchmark prices. Costs were slightly lower in 2020 due to lower natural gas prices and lower fixed costs. This more than offset higher depreciation and amortization per tonne related to expansion and turnaround work completed in late 2019. Other income increased due to a gain of $250 million recognized from the $540 million sale of our equity-accounted investment in MOPCO and settlement of related legal claims. Adjusted EBITDA decreased in 2020 primarily due to lower net realized selling prices more than offsetting higher sales volumes and lower cash cost of goods sold per tonne. NATURAL GAS PRICES IN COST OF PRODUCTION (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 36 Nutrien Annual Report 2020 2020 2019 % Change 2.31 0.05 2.36 2.08 1.68 2.47 0.11 2.58 2.63 1.22 (6) (55) (9) (21) 38 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information Overall gas cost Gas prices in our cost of production decreased in 2020 as lower US and Trinidad gas prices and a lower realized derivative impact more than offset higher Canadian gas prices. N 2020 vs 2019 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 2020 2019 6,750 4,216 1,467 755 217 179 5,554 4,716 1,466 915 264 194 NITROGEN PRODUCTION (million tonnes product) Trinidad Nitrogen 4 Redwater Nitrogen Augusta Nitrogen Lima Nitrogen Geismar Nitrogen Carseland Nitrogen Fort Saskatchewan Nitrogen Borger Nitrogen Joffre Nitrogen Total Ammonia operating rate 5 Ammonia 1 Production Urea 2 Production Annual Capacity 3 2020 2019 Annual Capacity 3 2020 2019 2.2 0.9 0.8 0.7 0.5 0.5 0.5 0.5 0.5 7.1 1.57 0.85 0.66 0.61 0.55 0.55 0.48 0.40 0.39 6.06 93 1.76 0.76 0.70 0.68 0.54 0.45 0.48 0.37 0.42 6.16 91 0.7 0.7 0.5 0.5 0.4 0.8 0.4 0.6 – 4.6 0.73 0.75 0.46 0.40 0.35 0.74 0.44 0.53 – 4.40 0.66 0.60 0.51 0.48 0.33 0.61 0.45 0.46 – 4.10 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 In 2020, we indefinitely closed one of our four ammonia plants in Trinidad in response to market conditions and lower global prices for ammonia. 5 Excludes Trinidad and Joffre. 2020 Nutrien Annual Report 37 PHOSPHATE $232M PHOSPHATE ADJUSTED EBITDA 85% P205 OPERATING RATE 2.8MMT MANUFACTURED PRODUCT SALES VOLUMES 38 Nutrien Annual Report 2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information PHOSPHATE OPERATING ENVIRONMENT P Our Business We are the second largest phosphate producer in North America and sell approximately 3 million tonnes of finished product. Nutrien has two integrated phosphate Due to the high quality of our including solid and liquid fertilizers, facilities in the US, both located near phosphate rock, we can produce a feed and industrial acids. key fertilizer consuming markets and diverse mix of phosphate products, industrial customers. 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 potential phosphate projects. We compete with producers primarily developing a rock deposit for mining. Significant low-cost capacity has from China, Morocco, Russia, Saudi These include the quality of the been commissioned over the past Arabia and the US. To produce phosphate rock, government stability few years, including most notably finished phosphate products (DAP, and subsidies, access to financing, in Morocco and Saudi Arabia. The MAP), access to low-cost ammonia environmental requirements and ability of these countries and others and sulfur is also an important proximity to target markets. Given to add low-cost capacity and operate consideration. the concentration of deposits in under less stringent environmental North Africa and the Middle East, regulation, is resulting in a long-term government stability is a major oversupply in the global market. consideration when evaluating Our Strategy We are focused on optimizing our plant sites, driving our rock costs down further, and evaluating opportunities to increase production of higher-margin product. We will leverage the quality and and specialty fertilizer. We will of our assets while generating positive capabilities of our assets to produce advance continuous improvement cash flows. and sell higher-margin industrial to enhance the reliability and safety 39 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information 2020 Performance In 2020 we lowered production costs per tonne and achieved record safety performance. We achieved record safety results rock. We also entered into an to provide a stable stream of earnings and lowered production costs per agreement with Arkema Inc. to starting in 2022. tonne partly attributed to eliminating produce anhydrous hydrofluoric acid the need for imported phosphate at our Aurora site, which is expected PHOSPHATE MANUFACTURED PRODUCT SALES VOLUMES (million tonnes) 3.2 3.3 2.9 2.8 US TAMPA FOB DAP PRICE ($/tonne) $432 $419 $354 $345 $323 $461 20171 2018 2019 2020 Source: Nutrien 1 2017 represents the historical combined results of PotashCorp and Agrium. 10-Year Avg (2011-2020) Source: CRU 2017 2018 2019 2020 Year-to-Date Feb 11, 2021 2020 MARKET CONDITIONS MARKET OUTLOOK Global phosphate prices benefited from improved We expect the phosphate market to remain firm in agricultural fundamentals and strong import demand in the near-term but with longer term uncertainty. Raw material costs continue to increase, which has been supportive of phosphate prices and are expected to provide a higher floor in 2021. Global phosphate consumption is forecast to grow at approximately 1.5 percent, with demand growth projected for South Asia, North America and Latin America, partly offset by expected additional supplies from Morocco. However, we believe the ability of key low- cost global producers to continue to add capacity could limit the longevity of the recent recovery in prices in the medium term. key markets particularly in Brazil and India. Brazil imported record volumes of MAP and DAP in 2020 amid favorable crop prices. India’s DAP imports were largely flat in 2020 compared to the previous year, but we believe DAP stocks in India ended the year at very low levels. The combination of strong demand in Brazil and India in the second half of 2020 tightened the global supply and demand balance, leading to a rebound from historically low prices. Meanwhile, a US countervailing duty petition against Moroccan and Russian phosphates in June 2020 further increased US domestic prices. Chinese phosphate exports declined in 2020 as suppliers were largely focused on their domestic market due to better margins, low inventories and COVID-19 related production impediments. Although Morocco continued to increase dry phosphate exports throughout 2020, global supplies did not keep pace with the strong demand in the second half of the year. 40 Nutrien Annual Report2020Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information PHOSPHATE FINANCIAL PERFORMANCE Dollars Tonnes (thousands) Average per Tonne P (millions of US dollars, except as otherwise noted) Manufactured product Net sales Fertilizer Industrial and feed Cost of goods sold Gross margin – manufactured Gross margin – other 1 Gross margin – total Expenses EBIT Depreciation and amortization EBITDA Impairment of assets Adjusted EBITDA 2020 2019 % Change 2020 2019 % Change 2020 2019 2,048 733 2,781 2,130 759 2,889 (4) (3) (4) Depreciation and amortization Gross margin excluding depreciation and amortization – manufactured 328 552 387 376 11 78 89 371 561 421 422 (1) 82 81 671 404 1,075 1,044 31 5 36 791 (755) 218 (537) 769 232 790 426 1,216 1,218 (2) (3) (5) 38 (43) 237 194 – 194 (15) (5) (12) (14) n/m n/m n/m n/m n/m (8) n/m n/m 20 % Change (12) (2) (8) (11) n/m (5) 10 1 Includes other phosphate and purchased products and is comprised of net sales of $127 million (2019 – $152 million) less cost of goods sold of $122 million (2019 – $155 million). The most significant contributors to the changes in our Phosphate financial performance were as follows: 2020 vs 2019 Sales volumes Net realized selling price Sales volumes decreased in 2020 from the conversion of the Redwater phosphate facility in the first half of 2019 to produce ammonium sulfate for our Nitrogen segment and from a lower operating rate. Our average realized phosphate fertilizer prices decreased in 2020 consistent with lower global benchmark prices compared to 2019. Cost of goods sold per tonne Costs decreased in 2020 due to a change in estimate in the second quarter related to an asset retirement obligation, favorable non-cash inventory adjustments and lower raw material costs. Impairment of assets Adjusted EBITDA In 2020, we recorded non-cash impairments of assets relating to our property, plant and equipment at Aurora and White Springs of $545 million and $215 million, respectively, primarily due to lower long- term forecasted global phosphate prices. See the “Critical Accounting Estimates” section of this MD&A and Note 13 to the financial statements. Adjusted EBITDA increased in 2020 due to the impact of the change in estimates for our asset retirement obligation and favorable non-cash inventory adjustments more than offsetting lower net realized selling prices. 2020 Nutrien Annual Report 41 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information PHOSPHATE PRODUCTION Phosphate Rock Phosphoric Acid (P2O5) Liquid Products Solid Fertilizer Products Production Production Production Production Annual Capacity 2020 2019 Annual Capacity 2020 2019 Annual Capacity 2020 2019 Annual Capacity 2020 2019 5.4 2.0 7.40 – 7.40 3.94 1.81 5.75 – 5.75 4.38 1.61 5.99 – 5.99 1.2 0.5 1.70 – 1.70 0.98 0.46 1.44 – 1.44 85 1.02 0.49 1.51 0.10 1.61 89 2.71 0.72 3.40 – 1.99 0.43 2.42 – 2.01 0.50 2.51 – 0.8 0.8 1.60 – 0.83 0.35 1.18 – 0.85 0.24 1.09 0.21 (million tonnes) Aurora Phosphate White Springs Phosphate Total producing locations Redwater Phosphate 3 Total P2O5 operating rate 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 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. 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. Production in 2020 was 0.31 and 0.20, respectively, and 2019 production was 0.30 and 0.21, respectively. 42 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information CORPORATE AND OTHERS FINANCIAL PERFORMANCE “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 2020 were $1,115 million (2019 – $1,060 million) with gross margin recovery of $21 million (2019 – $5 million). Eliminations are not part of the Corporate and Others segment. (millions of US dollars, except as otherwise noted) Sales 1 Cost of goods sold Gross margin Selling expenses General and administrative expenses Provincial mining and other taxes Share-based compensation expense Impairment of assets Other expenses EBIT Depreciation and amortization EBITDA Adjustments 2 Adjusted EBITDA 2020 82 74 8 (24) 269 2 69 5 228 (541) 52 (489) 203 (286) 2019 133 133 – (18) 264 2 104 120 171 (643) 42 (601) 364 (237) % Change (38) (44) n/m 33 2 – (34) (96) 33 (16) 24 (19) (44) 21 1 Primarily relates to our non-core Canadian business that was sold in 2020. 2 See Note 3 to the financial statements. The most significant contributors to the changes in our Corporate and Others financial performance were as follows: Share-based compensation expense Impairment of assets Other expenses 2020 vs 2019 Share-based compensation expense was lower in 2020 due to lower payout amounts and lower share-based award fair values. 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. Increase in expense is due to COVID-19 related expenses, higher acquisition and integration related expenses and higher project costs related to our Retail enterprise resource planning system as part of our digital transformation in 2020. These were partially offset by Merger and related costs incurred in 2019 with no comparative in 2020. COVID-19 expenses are directly attributable and incremental to the pandemic and primarily consist of increased cleaning and sanitization costs, the purchase of personal protective equipment, discretionary supplemental employee costs and costs related to construction delays from access limitations and other government restrictions. 2020 Nutrien Annual Report 43 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information FINANCE COSTS, INCOME TAX (RECOVERY) EXPENSE AND OTHER COMPREHENSIVE INCOME (millions of US dollars, except as otherwise noted) Finance costs Income tax (recovery) expense Other comprehensive income 2020 520 (77) 194 2019 554 316 36 % Change (6) n/m 439 The most significant contributors to the changes in our finance costs, income tax expense and other comprehensive income were as follows: 2020 vs 2019 Finance costs Finance costs decreased slightly as lower interest rates more than offset higher finance costs incurred as we managed our immediate liquidity position during the initial months of the COVID-19 pandemic. Weighted Average Debt Balances and Rates (millions of US dollars, except as otherwise noted) 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 (%) 2020 2,329 1.7 9,282 4.5 1,089 3.1 2019 1,324 4.5 8,534 4.7 1,024 3.4 1 North American weighted average short-term debt balances were $2,092 million (2019 – $1,063 million) and rates were 1.4 percent (2019 – 2.4 percent). Income tax (recovery) expense There was an income tax recovery in 2020 compared to an expense in 2019 primarily due to significantly lower earnings and discrete tax adjustments in 2020. The discrete tax adjustments in 2020 were primarily related to recoveries of prior year taxes due to US legislative changes. The change in effective tax rate is a result of a change in the proportionate earnings (loss) between jurisdictions. Effective Tax Rates and Discrete Items (millions of US dollars, except as otherwise noted) Actual effective tax rate on earnings (%) Actual effective tax rate including discrete items (%) Discrete tax adjustments that impacted the rate 2020 2019 3 (20) (80) 24 24 2 Other comprehensive income Other comprehensive income increased primarily due to a higher gain on translation of our Retail operations in Australia as the Australian dollar strengthened relative to the US dollar. There was also an increase in the net actuarial gain on our defined benefit pension plans. 44 Nutrien Annual Report 2020 FINANCIAL OVERVIEW Financial Highlights Financial Condition Review Liquidity and Capital Resources Capital Structure and Management Off-Balance Sheet Arrangements Other Financial Information Quarterly Results 2021 Guidance and Sensitivities Enterprise Risk Management Controls and Procedures Forward-Looking Statements 46 47 48 51 52 53 55 57 58 62 63 Appendix – Non-IFRS Financial Measures 64 Three-Year Highlights 70 45 Nutrien Annual Report2020Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information FINANCIAL HIGHLIGHTS (millions of US dollars, except as otherwise noted) Sales 1 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 1 Certain immaterial figures have been reclassified for the year ended December 31, 2019. 2020 20,908 459 0.81 0.81 459 0.81 0.81 47,192 10,947 1.80 2019 20,084 992 1.70 1.70 992 1.70 1.70 46,799 9,431 1.33 2018 19,636 (31) (0.05) (0.05) 3,573 5.72 5.72 45,502 7,616 2.06 Sales Net earnings and earnings per share from continuing operations Net earnings and earnings per share Assets and non-current financial liabilities 2020 vs 2019 2019 vs 2018 Sales increased as higher Retail sales from acquisitions and strong organic growth coupled with higher potash and nitrogen sales volumes, more than offset the impact of lower crop nutrient selling prices. Sales increased primarily due to Retail acquisitions and higher potash realized prices, driven by higher global benchmark pricing in the first half of 2019, more than offsetting lower potash and nitrogen volumes. Net earnings and earnings per share decreased compared to 2019 due to a non-cash impairment of our Phosphate property, plant and equipment at Aurora and White Springs and lower manufactured product margins from lower crop nutrient selling prices more than offsetting a net gain from disposal of our investment in MOPCO. Assets increased slightly from 2019. Recent acquisitions and higher cash and cash equivalents offset the non-cash impairment of assets and disposal of our investment in MOPCO in 2020. Non-current financial liabilities increased due to higher long-term debt from the issuance of new notes. 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. Assets increased primarily due to Retail acquisitions and the addition of right-of-use assets from the adoption of IFRS 16, “Leases”, partially offset by a decrease in cash and cash equivalents. 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. 46 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-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 and the consolidated statements of cash flows in our financial statements. Property, plant and equipment decreased due to non-cash impairments recorded in 2020 primarily related to the phosphate-related assets. Goodwill increased as a result of additional goodwill from the recent Retail acquisitions, primarily in Brazil. Investments decreased as we sold our equity-accounted investment in MOPCO. Other assets increased due to additional long-term income tax receivables recognized related to the US legislative changes (CARES Act) and higher accrued pension benefit assets from changes in actuarial assumptions. Short-term debt decreased as we continue to manage our working capital needs. Long-term debt (including current portion) increased due to the addition of $1.5 billion in notes issued in May 2020 exceeding the repayment of $500 million in notes that matured earlier in 2020. Payables and accrued charges increased due to a shift in timing of vendor payments and additional vendor prepayment arrangements, whereby we made financial commitments to vendors to prepay for inventory in return for product discounts. Shareholders’ Equity Retained earnings decreased due to dividends declared exceeding net earnings. We do not hold material cash and cash equivalents in currencies other than the US dollar and Canadian dollar. We held approximately $200 million US dollar equivalent in Australia and South America. We do not depend on repatriation of cash from our foreign subsidiaries to meet our liquidity and capital resources needs in North America. 2020 Nutrien Annual Report 47 Overview Management’s Discussion & Analysis Three-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 2020 significant liquidity sources are listed below along with our expected ongoing primary uses of liquidity. 2020 Key Sources and Uses Included: Primary Uses of Liquidity Primary Sources of Liquidity (cid:129) operational expenses and prepayments (cid:129) cash from operations (including customer (cid:129) seasonal working capital requirements (cid:129) sustaining and investing capital (cid:129) business acquisitions (cid:129) dividends and share repurchases (cid:129) principal payments of debt securities prepayments) (cid:129) commercial paper issuances (cid:129) increase of credit facility limits and drawdowns (cid:129) debt capital markets (cid:129) Invested to sustain and grow our safe, reliable and (cid:129) Issued $1.5 billion of notes on May 13, 2020. See cost-efficient operations. Sustaining capital expenditures were $919 million. Investing capital expenditures were $511 million. (cid:129) Returned cash to our shareholders through dividends and share repurchases (see Note 23 to the financial statements). Dividends paid were $1,030 million and share repurchases were $160 million. (cid:129) Repaid at maturity $500 million of 4.875 percent notes. See Note 18 to the financial statements. (cid:129) Repaid a net $650 million in commercial paper and had none issued as at December 31, 2020. Note 18 to the financial statements. (cid:129) Established $1.5 billion of new committed revolving credit facilities in March and April 2020, in response to the market uncertainty caused by the COVID-19 pandemic. We closed these credit facilities after the issuance of the new notes, as described above. In 2020, we drew down from and later repaid $3.5 billion of our revolving credit facilities to provide additional liquidity in the volatile market caused by the COVID-19 pandemic. We continue to monitor our liquidity position. (cid:129) Received $540 million on disposal of our investment in MOPCO and settlement of related legal claims. 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 the foreseeable future. We do not reasonably expect any presently known trend or uncertainty to affect our ability to access our historical sources of liquidity. 48 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information 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 investing activities Cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Increase (decrease) in cash and cash equivalents 2020 3,323 (1,204) (1,339) 3 783 2019 % Change 3,665 (2,798) (2,479) (31) (1,643) (9) (57) (46) n/m n/m Cash and cash equivalents increased by $783 million in 2020 compared to a decrease of $1,643 million in 2019, due to: (cid:129) proceeds of $540 million from the disposal of our investment in MOPCO and settlement of related legal claims, (cid:129) a decrease of $1.8 billion in share repurchases compared to the same period in 2019, (cid:129) a decrease of approximately $1 billion in Retail acquisitions and capital expenditures as we deferred or reduced capital projects mainly due to lower crop nutrient prices and COVID-19 precautions, and (cid:129) a decrease of approximately $500 million in long–term debt repayments compared to the same period in 2019. The above factors were partially offset by: (cid:129) lower cash from our operating activities as a result of lower crop nutrient prices compared to 2019, and (cid:129) an increase of $1.1 billion in short-term net debt repayments compared to the same period in 2019 as a lower level of short-term debt was required in 2020 due to improved working capital. 2020 Nutrien Annual Report 49 Overview Management’s Discussion & Analysis Three-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, 2020. The information presented in the table below does not include planned (but not legally committed) cash requirements. Planned or anticipated cash requirements that are not fully included in the table below include annual outflows for sustaining capital, investing capital, share repurchases, dividends and acquisitions. For information on income taxes and pension and other post retirement benefit funding, refer to Note 8 and Note 21, respectively, to the financial statements. Future cash requirements are subject to changes in regulations, actuarial assumptions, and our expected operating results. On February 17, 2021, our Board approved a share repurchase program of up to a maximum of 28,468,448 or 5 percent of our outstanding common shares for cancellation. Subject to acceptance by the Toronto Stock Exchange, the 2021 share repurchase program will commence on March 1, 2021, and will expire on the earlier of February 28, 2022, the date on which we have acquired the maximum number of common shares allowable or the date we determine not to make any further repurchases. (millions of US dollars) at December 31, 2020 Long-term debt Estimated interest payments on long- term debt Lease liabilities Estimated interest payments on lease liabilities Purchase commitments Capital commitments Other commitments Derivatives Asset retirement obligations and accrued Financial Statement Note Reference Note 18, 26 Note 26 Note 19, 26 Note 26 Note 26 Note 26 Note 26 Note 10 Payments Due by Period Total 9,742 6,053 1,145 160 2,239 110 430 48 Within 1 Year 14 420 259 22 1,268 87 132 39 1 to 3 Years 1,543 835 371 37 757 16 118 9 3 to 5 Years 1,809 689 208 25 72 6 53 – Over 5 Years 6,376 4,109 307 76 142 1 127 – environmental costs 1 Note 22 2,788 124 225 145 2,294 Total 22,715 2,365 3,911 3,007 13,432 1 Commitments reflect the estimated cash outflows for these obligations. See Note 22 to the financial statements for details. 50 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-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: (millions of US dollars) Credit facilities Unsecured revolving term credit facility 1 Uncommitted revolving demand facility Other credit facilities 2 Commercial paper Total Total Facility Limit as at December 31, 2020 4,500 500 740 Rate of Interest (%) Nil Nil 0.8 – 36.0 Nil 2020 2019 – – 159 – 159 – – 326 650 976 1 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. 2 Credit facilities are unsecured and consist of South American facilities with debt of $109 million (2019 – $149 million) and interest rates ranging from 1.7 percent to 36.0 percent, Australian facilities with debt of $19 million (2019 – $157 million) and an interest rate of 0.8 percent, and other facilities with debt of $31 million (2019 – $20 million) and an interest rate of 1.0 percent. Our long-term debt consists primarily of notes and debentures with the following maturities and interest rates: 2020 Nutrien Annual Report 51 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information We also have lease obligations totaling $1,140 million (including current portion) with a weighted average effective interest rate of 2.9 percent as at December 31, 2020. Following the decision by global regulators to replace Interbank Offered Rates (“IBORs”) with alternative nearly risk-free rates (“RFRs”), in August 2020 the International Accounting Standards Board completed Phase 2 of the Interest Rate Benchmark Reform. We are in the process of identifying and updating existing contracts extending past 2021 that reference IBORs, 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, 2020. The accompanying table summarizes the limit and result of our key financial covenant. At December 31 Limit 2020 Debt to capital ratio 1 0.65:1.00 0.34:1.00 1 Refer to Note 24 to the financial statements for the detailed calculation. 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 2020 2019 Baa2 (stable) BBB (stable) Baa2 (stable) BBB (stable) 2020 P-2 A-2 2019 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 18, 2021 569,790,353 10,295,789 For more information on our capital structure and management, see Note 24 to the financial statements. For more information on our short-term debt and long-term debt, see Note 17 and Note 18 to the financial statements. OFF-BALANCE SHEET ARRANGEMENTS Principal off-balance sheet activities primarily include: (cid:129) Agreement to reimburse losses of Canpotex (see Note 29 to (cid:129) Certain non-financial derivatives that were entered into and the financial statements). (cid:129) Issuance of guarantee contracts (see Note 22 and Note 27 to the financial statements). (cid:129) Agency arrangement with a financial institution in relation to certain customer loans (see Note 11 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 (see Note 10 to the financial statements). We do not reasonably expect any presently known trend or uncertainty to affect our ability to continue using these arrangements. 52 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information 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 28 to the financial statements for information on our related party transactions. 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 10 to the financial statements for information on our financial instruments, including the risks and risk management associated with such instruments. 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. Financial Statement Reference 1 Note 13 and Note 30 Long-lived asset impairment Critical Accounting Estimate Description In 2020, we identified an impairment indicator in our Phosphate cash-generating units (“CGUs”) due to lower long- term forecasted global phosphate prices, and recorded impairments to our property, plant and equipment at Aurora and White Springs of $545 million and $215 million, respectively. The recoverable amount of Aurora was determined using a fair value less costs of disposal (“FVLCD”) methodology based on after-tax discounted cash flows (using a five-year projection and a terminal year thereafter to the expected mine life) discounted at a post-tax rate of 10.5%. The recoverable amount of White Springs was determined using a value in use methodology assuming an end of mine life in 2029 and a post-tax discount rate of 12.0%. The recoverable amounts of Aurora and White Springs are most sensitive to the following key assumptions: our internal sales price forecasts, which consider projections from an independent third-party data source, discount rates and expected mine life. We used key assumptions that were based on historical data and estimates of future results from internal sources, external price benchmarks, mineral reserve technical reports, as well as industry and market trends. The following table highlights sensitivities to the recoverable amount, which could result in additional impairment losses or reversals of previously recorded losses. The sensitivities have been calculated independently of changes in other key variables. Key Assumptions Net selling price Discount rate Change in Assumption ±$10 per tonne ±1.0 percentage point Aurora Change in Recoverable Amount (millions of US dollars) ±150 ±120 For our White Springs CGU, there were no reasonably possible changes in the key assumptions that would result in a substantial change in the recoverable amount. In 2020, we performed impairment testing on the Trinidad CGU, part of our Nitrogen segment, due to the indefinite closure of an ammonia plant in response to market conditions and lower long-term forecasted global ammonia prices. No impairment resulted from comparing the carrying amount of the Trinidad CGU to its recoverable amount determined on a FVLCD methodology. FVLCD was based on after-tax discounted cash flows (using a five-year projection and a 2.0% terminal growth rate) discounted at a post-tax rate of 12.6%. The following table indicates the percentages by which key assumptions would need to change individually for the estimated Trinidad CGU recoverable amount to be equal to the carrying amount: Key Assumptions Net selling price (5-year average) Production volumes (5-year average) Discount rate (post-tax) Change Required for Carrying Amount to Equal Recoverable Amount 4 percent decrease 5 percent decrease 0.9 percentage point increase 2020 Nutrien Annual Report 53 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information Financial Statement Reference 1 Note 14 and Note 30 Goodwill impairment Critical Accounting Estimate Description 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 amount of each of our CGUs or groups of CGUs containing goodwill was in excess of their carrying amounts. Key assumptions in our testing models may change, and changes that could reasonably be expected to occur may cause impairment. The excess of the recoverable amount of the Retail – North America group of CGUs over the carrying amount is $1.7 billion, which is 13 percent. The sensitivity of Retail – North America’s recoverable amount 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 (millions of US dollars) +0.1 -0.1 +0.1 -0.1 +5.0 -5.0 (270) 280 240 (230) 900 (900) Note 25 Business combinations – measurement of assets acquired and liabilities assumed Significant judgment for our business combinations included 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. 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. In 2020, all of the business combinations were in the Retail segment. Note 8 and Note 29 Income taxes – measurement 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. Note 22 Asset retirement obligations (“AROs”) and accrued environmental costs (“ERLs”) – measurement 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. For the Nitrogen segment, we have not recorded any asset retirement obligations as 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. 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). 54 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information QUARTERLY RESULTS 2020 2019 (millions of US dollars, except as otherwise noted) Sales 1 Net earnings (loss) Adjusted EBITDA Net earnings per share (“EPS”) Basic Diluted Q4 4,052 316 768 0.55 0.55 Q3 4,227 (587) 670 (1.03) (1.03) Q2 8,431 765 1,721 1.34 1.34 Q1 4,198 (35) 508 (0.06) (0.06) Q4 3,462 (48) 664 (0.08) (0.08) Q3 4,185 141 787 0.25 0.24 Q2 8,704 858 1,870 1.48 1.47 Q1 3,733 41 704 0.07 0.07 1 Certain immaterial figures have been reclassified in each quarter of 2019 and in the first three quarters of 2020. Seasonality in our business results from increased demand for products during the planting season. Crop input sales are generally higher 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 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. Since the fourth quarter of 2019, Potash earnings have been impacted by lower net realized selling prices caused by a temporary slowdown in global demand. In the third quarter of 2020, earnings were impacted by non-cash impairments of property, plant and equipment primarily in the Phosphate segment as a result of lower forecasted global phosphate prices. Earnings were impacted by a net gain from disposal of our MOPCO investment and settlement of related legal claims in the fourth quarter of 2020. Fourth Quarter Financial Performance (millions of US dollars, unless otherwise noted) Three months ended December 31 Retail Crop nutrients Crop protection products Seed Merchandise Nutrien Financial Services and other 1 Nutrien Financial elimination 2 Total 2020 1,108 828 152 240 37 290 (37) 2,618 Sales 2019 907 635 99 211 – 339 – 2,191 % Change 2020 2019 % Change Gross Margin 22 30 54 14 n/m (14) n/m 19 236 343 58 41 37 207 (37) 885 186 281 60 44 – 185 – 756 27 22 (3) (7) n/m 12 n/m 17 1 Certain immaterial figures have been reclassified for the three months ended December 31, 2019. 2 Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches. (US dollars, unless otherwise noted) Three months ended December 31 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 Manufactured Product Sales Tonnes (thousands) Manufactured Product Average Net Price per MT 2020 2019 % Change 2020 2019 % Change 1,041 1,613 2,654 730 853 1,262 2,845 466 182 648 651 1,234 1,885 571 695 1,096 2,362 466 181 647 60 31 41 28 23 15 20 – 1 – 192 156 170 116 54 216 270 133 195 162 33 387 551 433 410 23 226 164 186 112 74 245 278 152 212 171 41 334 581 403 395 8 (15) (5) (9) 4 (27) (12) (3) (13) (8) (5) (20) 16 (5) 7 4 188 2020 Nutrien Annual Report 55 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information Highlights of our 2020 fourth quarter compared to the 2019 fourth quarter results were as follows: Retail Potash Nitrogen Phosphate Q4 2020 vs Q4 2019 Gross margin increased due to higher sales from recent acquisitions in Brazil and improved weather conditions in the US and Australia. Selling expenses increased due to the acquisitions and higher sales activity, but decreased as a percentage of sales. Gross margin increased from higher sales volumes due to strong domestic and offshore demand supported by improved crop prices, increased planted acreage in the US and strong fall application in North America in anticipation of higher planting in 2021. This was partially offset by decreased net realized selling prices due to lower year-over-year global benchmark prices as well as increased cost of goods sold per tonne as a result of higher depreciation and amortization related to production mix and the timing of maintenance projects relative to the fourth quarter of 2019. Cost of goods sold per tonne was positively impacted by higher production levels and production efficiencies. Gross margin increased from higher sales volumes across all product lines due to favorable weather conditions in North America supporting a strong application season and from a lower cost of goods sold per tonne resulting from lower depreciation and amortization per tonne which offset an increase in natural gas costs. These factors were partially offset by a lower net realized selling price, which was consistent with lower global and North American benchmark prices. Other income increased due to a gain on disposal of our MOPCO investment and settlement of related legal claims in the fourth quarter of 2020. Gross margin increased due to a higher realized fertilizer selling price from a recovery in global benchmark prices which was partially offset by lower industrial and feed prices and was impacted by timing lags to benchmark prices. This was partially offset by an increase in cost of goods sold per tonne resulting from higher input costs and lower production volumes, which more than offset lower depreciation and amortization following the non-cash impairment in the third quarter of 2020. Other fourth quarter financial highlights Impairment of assets decreased from $87 million to $1 million primarily due to certain impairments of various intangible assets and property, plant and equipment recorded in the fourth quarter of 2019 with no similar impairments in the fourth quarter of 2020. Share-based compensation expense increased from $9 million to $60 million primarily due to an increase in share price in the fourth quarter of 2020 compared to a decrease in the fourth quarter of 2019. An income tax recovery was recorded in the fourth quarter of 2020 as the $250 million net gain on disposal of our investment in MOPCO did not increase income tax expense due to available capital losses. We also had discrete tax adjustments primarily related to recoveries of prior year taxes due to US legislative changes. An income tax recovery was recorded in the fourth quarter of 2019 due to a loss before income taxes. The change in the actual effective tax rate on earnings is a result of a change in the proportionate earnings (loss) between jurisdictions. We had higher cash flows in the fourth quarter of 2020 compared to the same period in 2019 from proceeds from disposal of investment in MOPCO and higher cash from operations from higher Retail sales and working capital improvements. 56 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information 2021 GUIDANCE (billions of US dollars except as otherwise noted) Adjusted net earnings per share (“Adjusted EPS”) 2 Adjusted EBITDA Retail adjusted EBITDA Potash adjusted EBITDA Nitrogen adjusted EBITDA Phosphate adjusted EBITDA (millions) Potash sales tonnes (millions) 3 Nitrogen sales tonnes (millions) 3 Depreciation and amortization Effective tax rate on adjusted earnings (%) Sustaining capital expenditures 1 See the “Forward-Looking Statements” section. 2 Assumes 570 million shares outstanding for all EPS guidance and sensitivities. 3 Manufactured product only. Nitrogen sales tonnes excludes ESN® and Rainbow products. ASSUMPTIONS 2021 Average Canadian to US dollar exchange rate 2021 NYMEX natural gas (US dollars per MMBtu) 2021 SENSITIVITIES PRICE AND VOLUME SENSITIVITIES INPUT COST SENSITIVITIES (millions of US dollars, except EPS amounts) Price Potash changes by $25/tonne Ammonia changes by $25/tonne Urea changes by $25/tonne Volume Potash changes by 100,000 tonnes ±0.35 ±0.06 ±0.11 ±0.01 Nitrogen changes by 50,000 N tonnes ±0.01 Retail Crop nutrients changes by 1% 1 Crop protection changes by 1% 1 Seed changes by 1% 1 ±0.07 ±0.07 ±0.03 1 Gross margin as a percentage of sales. Effect on Adjusted EPS Adjusted EBITDA (millions of US dollars, except EPS amounts) (impact on Nitrogen) NYMEX natural gas price changes by $1/MMBTu Canadian to US dollar changes by $0.02 ±260 ± 47 ± 82 ± 11 ± 7 ± 55 ± 54 ± 20 2021 Guidance Ranges 1 Low 2.05 4.0 1.5 1.4 1.1 250 12.5 10.9 1.9 22 1.1 High 2.75 4.5 1.6 1.6 1.3 350 13.0 11.4 2.0 24 1.2 1.29 2.80 Effect on Adjusted EPS Adjusted EBITDA ±0.21 ±155 ±0.02 ± 14 2020 Nutrien Annual Report 57 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information ENTERPRISE RISK MANAGEMENT Nutrien integrates risk management into our strategic and business activities to facilitate informed risk taking. We focus on identifying and managing risks that are critical to achieving our strategic objectives. Risk Governance Risk management is governed by our Board and Board committees, who oversee our Executive Leadership Team in understanding the principal risks to our business and strategy. Responsibility and accountability for risk management are embedded in all levels of our organization, and we strive to integrate risk management into key decision-making processes and strategy. By considering risk throughout our business, we seek to align our strategy with our vision and effectively manage the risks that could have an impact on our ability to deliver our strategy. COVID-19 Update We are continually assessing and responding to the effects of the COVID-19 pandemic on our employees, customers. and suppliers, and evaluating governmental and other public health authority actions being taken to curtail its spread. Our operations have been designated as part of critical infrastructure and as essential businesses (or equivalents) in our core markets, allowing us to continue to operate. We have implemented COVID-19 safety protocols across our operations to help protect and support our employees, customers and suppliers. We have also successfully shifted virtually all of our corporate staff to a work-from-home program. Our crisis management team and leadership continue to monitor the COVID-19 situation and adjust plans accordingly. While COVID-19 has had limited impact on our reported results to date, future impacts will depend on future developments, which cannot currently be predicted and may negatively impact our business, results of operations, financial condition or liquidity. Key Risks We characterize a Key Risk as a risk or combination of risks that could threaten the achievement of our vision and ability to deliver on our strategy. We evaluate and develop responses for those risks that could have a significant safety and health, environmental, financial or reputational impact. In addition to COVID-19, we consider the following to be Key Risks at this time. For a more detailed discussion of all our risks, including COVID-19, refer to Nutrien’s 2020 Annual Information Form. 1 Agriculture Changes and Trends Associated Key Priorities Description Risk Management Approach 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 including soil health; climate change; water management; changes in consumer food preferences; governments and climate-related initiatives; and technological innovation and digital business models. Our integrated business platform and diversified earnings portfolio are designed to respond and adapt to changes in agriculture. Nutrien also provides a diverse portfolio of expertise, products, services and digital analytics that support growers to produce higher yields in a sustainable manner. We recently launched our plan to create the agricultural industry’s most comprehensive Carbon Program, designed to provide end-to-end support for growers to drive improved sustainability and boost profitability. Our digital tools also allow growers to track their sustainability outcomes, providing transparency to value-chain partners. 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. See pages 11 & 14 of this report for information on Nutrien’s Strategy and our Carbon Program. Sustainability Growth & Capital Allocation Innovation & Technology Employees 58 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-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 those relating to health and safety, taxes and royalties, environmental and climate change, including regulation of GHG emissions – 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, allowing us to anticipate new policies and put the Company in the best position for success while leveraging our industry association allies. We have a sustainability strategy, an active Issues Management Team and are in the process of developing a climate action plan to assist in managing the impact of potential regulatory changes. 4 Cybersecurity Threats Associated Key Priorities Description Cyberattacks or breaches of our systems, including our Retail 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 and/or personally identifiable 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. Sustainability Growth & Capital Allocation Innovation & Technology Employees 2020 Nutrien Annual Report 59 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information Enterprise Risk Management Continued 5 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. 6 Stakeholder Support Associated Key Priorities Description Our stakeholders may not support our business plans, structure, strategy or core sustainability such as ESG initiatives and climate targets, 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 have an Issues Management Team that continuously monitors stakeholder issues and that regularly engages with our stakeholders to identify and address their concerns and communicate the long- term value opportunities associated with our business plans. We recently launched our plan to create the agricultural industry’s most comprehensive Carbon Program and have a sustainability strategy that is structured to support what matters most to our stakeholders. We also are in the process of developing our climate action plan. See page 13 of this report for information on our ESG strategy. 7 Talent and Organizational Culture Associated Key Priorities Description An inability to attract, develop, engage or retain skilled employees, or establish the right organizational culture, could impact productivity, reliability, safety performance, costs, customer relationships, and/or our reputation. Risk Management Approach We have a proactive in-house Talent Attraction and Sourcing Team that focuses on efficiently building a diverse and talented workforce with the current and future skills we need. We are committed to the career development of our employees and building a culture grounded in our organizational purpose and the values of safety and integrity. Our active listening strategy keeps a pulse on employee experience and engagement and our inclusive culture. Our talent succession process focuses on identifying and managing critical roles and the proactive build of internal and external bench strength with an eye to diversity. Our incentive programs are competitive and performance-based and support our purpose-driven culture. Sustainability Growth & Capital Allocation Innovation & Technology Employees 60 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information Enterprise Risk Management Continued 8 Retail Business Model Associated Key Priorities Description Risk Management Approach 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. Refer to Nutrien’s 2020 Annual Information Form for risk factors related to the implementation of our new enterprise resource planning system. 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. 9 Capital Redeployment Associated Key Priorities Description Our inability to deploy capital to efficiently achieve sustained growth 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 our capital allocation policy prioritizes sustaining our assets, preserving the strength and resiliency of our balance sheet, supporting a sustainable dividend, and applying a rigorous compete-for-capital re-investment strategy to maximize shareholder value. See page 18 of this report for our Capital Allocation Policy. 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 that involve independent audits and assessments. 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 2020 Nutrien Annual Report 61 Overview Management’s Discussion & Analysis Three-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, 2020, 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). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as at December 31, 2020, Nutrien Ltd. did maintain effective internal control over financial reporting. In 2020, as part of our digital transformation, we implemented a new enterprise resource planning system in the Retail segment. The Digital Transformation implementation in the Retail environment has resulted in a more automated control environment for our Canadian and Loveland Products operations. This change has materially affected our internal control over financial reporting. On September 30, 2019, we completed the Ruralco acquisition. The acquisition of Ruralco was previously 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. As a result of the acquisition of Ruralco and the integration of the Australian Retail operations, the internal control over the Australian Retail operations came into scope of the Company’s internal control over financial reporting in the fourth quarter of 2020. We completed the integration of our Ruralco control environment into the Nutrien control environment to ensure controls were operating effectively as at December 31, 2020. Management used appropriate procedures to ensure internal controls were in place during and after implementation. The integration of the Australian Retail operations has materially affected our internal control over financial reporting. COVID-19 has also affected our business. In 2020, corporate office staff and many site administrative staff have worked from home. This change has required certain processes and controls that were previously done or documented manually to be completed and retained in electronic form. This change has not materially affected our internal control over financial reporting. Except as discussed herein, there have been no changes in, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The effectiveness of the Company’s internal control over financial reporting as at December 31, 2020 was audited by KPMG LLP, as reflected in their report, which is included in this 2020 Annual Report. 62 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information FORWARD-LOOKING STATEMENTS Certain statements and other information included in this document, including within the “2021 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 business strategies, plans, prospects and opportunities; Nutrien’s 2021 annual guidance, including our expectations regarding our adjusted net earnings per share and adjusted EBITDA (consolidated and by segment); expectations regarding adjusted EBITDA growth; expectations regarding our growth and capital allocation intentions and strategies; capital spending expectations for 2021; expectations regarding performance of our operating segments in 2021, including our operating segment market outlooks and market conditions for 2021, and the 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 import and export volumes; expectations regarding our sustainability, environmental (including climate), diversity and inclusion and innovation and technology strategies, initiatives, plans and targets; expectations regarding the expansion and enhancement of our Retail digital platform; expectations regarding repurchases of our common shares, including the timing thereof; expectations regarding the sufficiency of Nutrien’s liquidity, including the sources thereof, to meet its anticipated capital expenditures and other cash requirements; expectations regarding the impact to Nutrien of the transition from interbank offered rates to nearly risk-free rates; the negotiation of sales contracts; the implementation of our carbon program and the benefits to Nutrien and growers therefrom; and acquisitions and divestitures, and the expected synergies associated with certain acquisitions, including the 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, having regard to our experience and our perception of historical trends, 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. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty. 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 divestitures, and that we will be able to implement our standards, controls, procedures and policies in respect of any acquired businesses and 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; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2021 and in the future; our expectations regarding the impacts, direct and indirect, of the COVID-19 pandemic on our business, customers, business partners, employees, supply chain, other stakeholders and the overall economy; 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; our ability to successfully negotiate sales contracts; our ability to successfully implement new initiatives and programs; and our ability to redeploy capital to generate higher returns for shareholders. 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, including our costs of addressing or mitigating such risks; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; interruptions of or constraints in availability of key inputs, including natural gas and sulfur; any significant impairment of the carrying amount 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; the COVID-19 pandemic and its resulting effects on economic conditions, restrictions imposed by public health authorities or governments, fiscal and monetary responses by governments and financial institutions and disruptions to global supply chains; 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 and adjusted EBITDA (consolidated and by segment) guidance ranges, as well as our adjusted earnings per share and adjusted EBITDA price and volume and input costs sensitivities ranges, are to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes. The forward-looking statements in this document are made as of the date hereof and 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. 2020 Nutrien Annual Report 63 Overview Management’s Discussion & Analysis Three-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 historical or future financial performance, financial position or cash flow that are not specified, defined or determined under IFRS, and are not presented in our financial statements. Non-IFRS measures either exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure specified, defined or determined under 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. Except as otherwise described herein, our non-IFRS financial measures are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable. As non-recurring or unusual items arise, we generally exclude these items in our calculation. ADJUSTED EBITDA (CONSOLIDATED) Most directly comparable IFRS financial measure: Net earnings (loss). Definition: Adjusted EBITDA is calculated as net earnings (loss) before finance costs, income taxes, depreciation and amortization, Merger and related costs, certain acquisition and integration related costs, share-based compensation, impairment of assets, certain foreign exchange gain/loss (net of related derivatives), COVID-19 related expenses, loss on disposal of business and net gain on disposal of investment in MOPCO. In 2020, we amended our calculation of adjusted EBITDA to adjust for the impact of COVID-19 related expenses, loss on disposal of business and net gain on disposal of investment in MOPCO. There were no similar income or expenses in the comparative period. To align with the change in our segment performance measure effective in 2020, we will primarily use adjusted EBITDA going forward as our consolidated performance measure. Why we use the measure and why it is useful to investors: It is not impacted by long-term investment and financing decisions, but rather focuses on the performance of our day-to-day operations. It provides a measure of our ability to service debt and to meet other payment obligations. (millions of US dollars) Net earnings Finance costs Income tax (recovery) expense Depreciation and amortization EBITDA Merger and related costs Acquisition and integration related costs Share-based compensation expense Impairment of assets COVID-19 related expenses Foreign exchange loss, net of related derivatives Loss on disposal of business Net gain on disposal of investment in MOPCO Adjusted EBITDA 64 Nutrien Annual Report 2020 2020 459 520 (77) 1,989 2,891 – 60 69 824 48 19 6 (250) 3,667 2019 992 554 316 1,799 3,661 82 16 104 120 – 42 – – 4,025 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information ADJUSTED EBITDA (CONSOLIDATED), ADJUSTED NET EARNINGS PER SHARE AND SUSTAINING CAPITAL EXPENDITURES GUIDANCE Adjusted EBITDA, adjusted net earnings per share and sustaining capital expenditures guidance are forward-looking non-IFRS financial measures. 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 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 for adjusted EBITDA and adjusted net earnings per share excludes the impacts of acquisition and integration related costs, share-based compensation, certain foreign exchange gain/loss (net of related derivatives), and COVID-19 related expenses. Guidance for sustaining capital expenditures includes expected expenditures required to sustain operations at existing levels and includes major repairs and maintenance and plant turnarounds. ADJUSTED NET EARNINGS AND ADJUSTED NET EARNINGS PER SHARE Most directly comparable IFRS financial measure: Net earnings (loss) and net earnings (loss) per share. Definition: Net earnings (loss) before certain acquisition and integration related costs, share-based compensation, certain foreign exchange gain/loss (net of related derivatives), COVID-19 related expenses (including those recorded under finance costs), loss on disposal of business, net gain on disposal of investment in MOPCO and impairment of assets, net of tax. We generally apply the annual forecasted effective tax rate to our adjustments during the year and, at year-end, we apply the actual effective tax rate. If the effective tax rate is significantly different from our forecasted effective tax rate due to adjustments or discrete tax impacts, we apply a tax rate that excludes those items. For material adjustments, we apply a tax rate specific to the adjustment. In 2020, we amended our calculation of adjusted net loss to adjust for the impact of COVID-19 related expenses, loss on disposal of business and net gain on disposal of investment in MOPCO. 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 Adjustments: Merger and related costs Acquisition and integration related costs Share-based compensation expense Impairment of assets COVID-19 related expenses Foreign exchange loss, net of related derivatives Loss on disposal of business Net gain on disposal of investment in MOPCO (250) Adjusted net earnings 2020 Increases (Decreases) Post-Tax Per Diluted Share Increases (Decreases) – 60 69 824 67 19 6 459 – 44 50 657 49 14 4 (250) 1,027 0.81 – 0.08 0.09 1.15 0.09 0.02 – (0.44) 1.80 82 16 104 120 – 42 – – 2019 Post-Tax 992 62 12 79 91 – 32 – – Per Diluted Share 1.70 0.10 0.02 0.14 0.16 – 0.05 – – 1,268 2.17 FREE CASH FLOW AND FREE CASH FLOW INCLUDING CHANGES IN NON-CASH OPERATING 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. We also calculate a similar measure that includes changes in non-cash operating working capital. 2020 Nutrien Annual Report 65 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information Why we use the measure and why it is useful to investors: For evaluation of liquidity and financial strength. These are also useful as indicators 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 Sustaining capital expenditures Free cash flow Changes in non-cash operating working capital Free cash flow including changes in non-cash operating working capital 2020 2,749 (919) 1,830 574 2,404 2019 3,175 (1,018) 2,157 490 2,647 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 2020 1,183 (10) (12) 1,161 (424) 737 12,595 59 2019 1,103 10 (16) 1,097 (355) 742 11,700 63 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. 66 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information 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 2020 2,265 (522) (1,342) 401 (52) 349 (235) 114 2,649 43 2019 2,148 (462) (1,226) 460 (57) 403 (273) 130 2,887 45 1 Includes changes in inventory balances and other adjustments. 2 Ammonia tonnes available for sale, as not upgraded to other Nitrogen products. NUTRIEN FINANCIAL NET INTEREST MARGIN Most directly comparable IFRS financial measure: Nutrien Financial gross margin divided by average Nutrien Financial receivables. Definition: Nutrien Financial revenue less deemed interest expense divided by average Nutrien Financial receivables outstanding for the last four rolling quarters. Why we use the measure and why it is useful to investors: Used by credit rating agencies and other users to evaluate financial performance of Nutrien Financial. Rolling four quarters ended December 31, 2020 (millions of US dollars, except as otherwise noted) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Total/Average Nutrien Financial revenue Deemed interest expense 1 Net interest 16 (5) 11 40 (15) 25 36 (15) 21 37 (14) 23 Average Nutrien Financial receivables 795 2,108 1,711 1,392 Nutrien Financial net interest margin (%) 80 1,502 5.3 1 Average borrowing rate applied to the notional debt required to fund the portfolio of receivables from customers monitored and serviced by Nutrien Financial. SUSTAINING CAPITAL EXPENDITURES AND INVESTING CAPITAL EXPENDITURES Most directly comparable IFRS financial measure: Cash additions to property, plant and equipment and intangible assets. Definition: Sustaining capital expenditures are required to sustain operations at existing levels and include major repairs and maintenance and plant turnarounds. Investing capital expenditures are 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. 2020 Nutrien Annual Report 67 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information Why we use the measure and why it is useful to investors: Sustaining capital expenditures show the capital investment required to sustain our existing operations, and are the first priority in our capital allocation policy. Investing capital expenditures are an important component in understanding how much we have invested to grow our business excluding business acquisitions and investments in equity-accounted investees. (millions of US dollars, except as otherwise noted) Additions to property, plant and equipment Additions to intangible assets Consists of: Sustaining capital expenditures Investing capital expenditures Other capital expenditures 2020 1,423 126 1,549 919 511 119 1,549 2019 1,728 163 1,891 1,018 772 101 1,891 RETAIL ADJUSTED AVERAGE WORKING CAPITAL TO SALES AND RETAIL ADJUSTED AVERAGE WORKING CAPITAL TO SALES EXCLUDING NUTRIEN FINANCIAL Most directly comparable IFRS financial measure: (Current assets minus current liabilities for Retail) divided by Retail sales. Definition: Retail adjusted average working capital divided by Retail adjusted sales for the last four rolling quarters. We exclude in our calculations the working capital and sales of certain acquisitions (such as Ruralco) during the first year following the acquisition. We have amended our calculation to adjust for the sales of certain recently acquired businesses. We also look at this metric excluding the sales and working capital of Nutrien Financial. 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 efficiency, respectively. The metric excluding Nutrien Financial shows the impact that the working capital of Nutrien Financial has on the ratio. (millions of US dollars, except as otherwise noted) Average working capital Average working capital from certain recent acquisitions Adjusted average working capital Average Nutrien Financial working capital Adjusted average working capital excluding Nutrien Financial Sales 2 Sales from certain recent acquisitions Adjusted sales Nutrien Financial revenue 2 Adjusted sales excluding Nutrien Financial 2020 2019 2,173 (11) 2,162 (1,502) 660 14,785 (686) 14,099 (129) 13,970 3,097 (53) 3,044 n/a 1 n/a 1 13,282 (249) 13,033 n/a 1 n/a 1 1 We did not calculate this metric excluding Nutrien Financial in 2019 as it was in its first year of operations. 2 Certain immaterial figures have been reclassified for 2019. Adjusted average working capital to sales (%) Adjusted average working capital to sales excluding Nutrien Financial (%) 15 5 23 n/a 1 RETAIL CASH OPERATING COVERAGE RATIO Most directly comparable IFRS financial measure: Retail operating expenses1 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. 68 Nutrien Annual Report 2020 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information 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. (millions of US dollars, except as otherwise noted) Operating expenses 1,2 Depreciation and amortization in operating expenses Operating expenses excluding depreciation and amortization Gross margin 2 Depreciation and amortization in cost of goods sold Gross margin excluding depreciation and amortization Cash operating coverage ratio (%) Cash operating coverage ratio before reclassification (%) 3 2020 2,974 (658) 2,316 3,736 10 3,746 61.8 61.1 2019 2,665 (585) 2,080 3,301 7 3,308 62.9 62.2 1 Includes Retail expenses below gross margin including selling expenses, general and administrative expenses and other (income) expenses. 2 Certain immaterial figures have been reclassified for 2019. 3 Adjusted to reflect what the metric would have been prior to a reclassification of certain immaterial figures. RETAIL ADJUSTED EBITDA PER US SELLING LOCATION Most directly comparable IFRS financial measure: Retail US adjusted EBITDA. Definition: Total Retail US adjusted 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. This measure includes locations we have owned for more than 12 months. In the third quarter of 2020, we revised this measure from US EBITDA to US adjusted EBITDA to align with how we evaluate Retail results. There were no changes to this measure as a result of the change. (millions of US dollars, except as otherwise noted) Adjusted US EBITDA Adjustments for acquisitions Adjusted US EBITDA adjusted for acquisitions Number of US selling locations adjusted for acquisitions Adjusted EBITDA per US selling location (thousands of US dollars) 2020 985 (5) 980 912 1,075 2019 899 (27) 872 902 967 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 1 Comparable store sales (%) Prior period normalized for benchmark prices and foreign exchange rates 1 Normalized comparable store sales (%) 1 Certain immaterial figures have been reclassified in 2020 2020 2019 13,546 13,282 2 12,784 6 12,568 12,520 0 12,636 (1) 2020 Nutrien Annual Report 69 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information THREE-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) 2020 2019 2018 Operations Sales 1 Earnings before finance costs and income taxes Net earnings (loss) from continuing operations Net earnings Diluted net earnings per share from continuing operations Diluted net earnings per share Finance costs Adjusted EBITDA 2 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 1,3 Potash net sales Nitrogen net sales 4 Phosphate net sales 4 Retail adjusted EBITDA Potash adjusted EBITDA Nitrogen adjusted EBITDA 4 Phosphate adjusted EBITDA 4 Capital Allocation Sustaining capital expenditures Investing capital expenditures Mine development and pre-stripping expenditures Business acquisitions (net of cash acquired) Purchase of investments Dividends paid Payments for share repurchases 1 Certain immaterial figures have been reclassified for 2019 and 2018. 2 See the “Non-IFRS Financial Measures” section. 3 Certain immaterial figures have been reclassified or grouped together for 2018. 4 Restated 2018 for the reclassification of sulfate from the Phosphate segment to the Nitrogen segment. 70 Nutrien Annual Report 2020 20,908 902 459 459 0.81 0.81 520 3,667 3,323 47,192 11,360 22,365 570 48.16 5.5 14,785 2,146 2,740 1,202 1,430 1,190 1,080 232 919 511 109 233 102 1,030 160 20,084 1,862 992 992 1.70 1.70 554 4,025 3,665 46,799 11,104 22,869 583 47.91 5.5 13,282 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 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 1,606 1,215 255 985 320 100 433 135 952 1,800 Overview Management’s Discussion & Analysis Three-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 Total employee turnover rate (%) Proportion of women (%) Proportion of women in senior leadership (director level and above) (%) 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. 2018 figures were restated to exclude Redwater. 3 Restated 2018 for the reclassification of sulfate from the Phosphate segment. 2020 2019 2018 1.10 0.25 1 23 18 286 1.34 0.34 1 23 17 628 23,100 13 20 19 22,300 13 19 15 1.28 0.34 2 22 17 1,614 20,300 14 17 17 2020 2019 2018 12,595 6,063 1,444 12,732 12,824 10,966 2,781 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 2020 Nutrien Annual Report 71 FINANCIAL STATEMENTS & NOTES Share-Based Compensation 2020 At a Glance Consolidated Statements of Earnings Consolidated Statements of Comprehensive Income Consolidated Statements of Cash Flows Consolidated Statements of Changes in Shareholders' Equity Consolidated Balance Sheets Note 1 Description of Business Note 2 Basis of Presentation Segment Information Note 3 Note 4 Nature of Expenses Note 5 Note 6 Other (Income) Expenses Finance Costs Note 7 Note 8 Income Taxes Note 9 Net Earnings Per Share Note 10 Financial Instruments and Related Risk Management Note 11 Receivables Note 12 Inventories Note 13 Property, Plant and Equipment Note 14 Goodwill and Other Intangible Assets Note 15 Investments Note 16 Other Assets Note 17 Short-Term Debt Note 18 Long-Term Debt Note 19 Lease Liabilities Note 20 Payables and Accrued Charges Note 21 Pension and Other Post-Retirement Benefits Note 22 Asset Retirement Obligations and Accrued Environmental Costs Note 23 Share Capital Note 24 Capital Management Note 25 Business Combinations Note 26 Commitments Note 27 Guarantees Note 28 Related Party Transactions Note 29 Contingencies and Other Matters Note 30 Accounting Policies, Estimates and Judgments 79 80 80 81 82 83 84 84 85 89 90 92 92 93 95 95 99 100 101 103 105 105 106 107 108 108 109 113 114 115 117 119 120 121 121 123 46 Nutrien Annual Report2020 2020 Nutrien Annual Report 73 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information MANAGEMENT’S RESPONSIBILITY Management’s Responsibility for Financial Reporting MANAGEMENT’S REPORT ON THE CONSOLIDATED 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 (“IFRS”) as issued by the International Accounting Standards Board 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 appointed by the Board of Directors is composed entirely of independent directors. The audit committee discusses and analyzes the Company’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’s 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 of Independent Registered Public Accounting Firm for 2020. KPMG LLP has full and independent access to the audit committee to discuss their audit and related matters. 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 Securities 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 in Internal Control – Integrated Framework (2013). Based on this evaluation, management concluded that, as of December 31, 2020, the Company did maintain effective internal control over financial reporting. The effectiveness of the Company’s internal control over financial reporting as at December 31, 2020 has been audited by KPMG LLP, as reflected in their Report of Independent Registered Public Accounting Firm for 2020. Chuck Magro President and Chief Executive Officer February 18, 2021 Pedro Farah Executive Vice President and Chief Financial Officer February 18, 2021 74 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-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, 2020, 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, 2020, 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, 2020 and 2019, the related consolidated statements of earnings, comprehensive income, cash flows, and changes in shareholders’ equity for the years then ended, and the related notes (collectively, the “consolidated financial statements”), and our report dated February 18, 2021 expressed an unqualified opinion on those consolidated financial statements. 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 Annual Report on Internal Control over Financial Reporting. 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 18, 2021 In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 75 Overview Management’s Discussion & Analysis Three-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, 2020 and 2019, the related consolidated statements of earnings, comprehensive income, cash flows, and changes in shareholders’ equity 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, 2020 and 2019, and its financial performance 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, 2020, 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 18, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. 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 US 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. GOODWILL IMPAIRMENT ASSESSMENT OF THE RETAIL NORTH AMERICA GROUP OF CASH GENERATING UNITS As discussed in Note 14 to the consolidated financial statements, the carrying amount of goodwill as of December 31, 2020 was $12,198 million, of which $6,869 million of goodwill has been allocated to the Retail North America group of cash generating units (“Retail North America CGU”). The Retail North America CGU is tested for impairment annually, and whenever events or changes in circumstances may indicate the carrying amount, including goodwill, exceeds its estimated recoverable amount. The calculation of the recoverable amount of the Retail North America CGU involved estimates including forecasted earnings before tax, interest, depreciation and amortization (“EBITDA”), terminal growth rate and the discount rate. 76 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information Report of Independent Registered Public Accounting Firm Continued We identified the calculation of the recoverable amount of goodwill for the Retail North America CGU as a critical audit matter. A high degree of auditor judgment was required to evaluate the Company’s forecasted EBITDA, terminal growth rate and discount rate used to calculate the recoverable amount of the Retail North America CGU. Minor changes to these assumptions could have had a significant effect on the Company’s calculation of the recoverable amount of the Retail North America CGU. Additionally, the audit effort associated with this estimate required specialized skills and knowledge. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the calculation of the recoverable amount of goodwill for the Retail North America CGU. This included controls related to the determination of forecasted EBITDA, terminal growth rate and the discount rate. We evaluated the Company’s forecasted EBITDA for the Retail North America CGU by comparing to historical results and forecasted planted acreage in the United States. We evaluated the terminal growth rate by comparing to the historical growth of the Retail North America CGU and to market information, including forecasted inflation and forecasted gross domestic product in the United States. We evaluated the Company’s historical forecasts of EBITDA by comparing 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 determination of the discount rate by comparing the inputs to the discount rate to publicly available market data for comparable entities and assessing the resulting discount rate, and (cid:129) evaluating the Company’s estimate of the recoverable amount of the Retail North America cash generating unit by comparing the results of the Company’s estimate to publicly available market data and valuation metrics for comparable entities. IMPAIRMENT OF THE AURORA CASH GENERATING UNIT As discussed in Note 13 to the consolidated financial statements, the Company recorded an impairment of assets for the Aurora cash generating unit (“Aurora CGU”) of $545 million during the year ended December 31, 2020. The Company is required to assess each cash generating unit for an indicator of impairment at each reporting date, and whenever events or changes in circumstances may indicate the carrying amount of a cash generating unit exceeds its recoverable amount. An indicator of impairment was identified for the Aurora CGU at September 30, 2020, due to negative revisions to long-term forecasted global phosphate prices, which resulted in the Company performing an impairment test to calculate the recoverable amount. The calculation of the recoverable amount of the Aurora CGU involved estimates including the forecasted product net selling price, discount rate and the useful life of the mine. The useful life of the mine is derived from the most recent mineral reserves estimate, which requires the expertise of independent reserve engineering specialists. We identified the calculation of the recoverable amount of the Aurora CGU as a critical audit matter. A high degree of auditor judgment was required to evaluate the Company’s estimate of the forecasted product net selling prices and discount rate used to calculate the recoverable amount of the Aurora CGU. Minor changes to these assumptions could have had a significant effect on the Company’s calculation of the recoverable amount and the resultant impairment loss. Auditor judgment was also required to assess the mineral reserves estimate which forms the basis of the useful life of the mine. Additionally, the audit effort associated with this estimate required specialized skills and knowledge. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 77 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information Report of Independent Registered Public Accounting Firm Continued The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the calculation of the recoverable amount of the Aurora CGU. This included controls related to the determination of forecasted product net selling prices, the discount rate, as well as the mineral reserves and useful life of the mine. We evaluated certain forecasted product net selling prices of the Company by comparing to external forecasts. We evaluated the current year product net selling prices by comparing to those assumptions used in the prior year forecast to assess the Company’s ability to accurately forecast. We assessed the methodology used by the Company to estimate the mineral reserves and resources for consistency with industry and regulatory standards. We evaluated the Company’s estimate of mineral reserves and resources by comparing the Company’s historical estimates to actual results. We assessed the competence, capabilities and objectivity of the Company’s personnel and third-party engineers who prepared the mineral reserve estimate. We involved valuation professionals with specialized skills and knowledge who assisted in evaluating the Company’s determination of the discount rate by comparing the inputs to the discount rate to publicly available market data and assessing the resulting discount rate. IMPAIRMENT ASSESSMENT OF THE TRINIDAD CASH GENERATING UNIT As discussed in Note 13 to the consolidated financial statements, the Company is required to assess each cash generating unit for an indicator of impairment at each reporting date, and whenever events or changes in circumstances may indicate the carrying amount of a cash generating unit exceeds its recoverable amount. An indicator of impairment was identified for the Trinidad cash generating unit (“Trinidad CGU”) at September 30, 2020, due to the indefinite closure of an ammonia plant in response to market conditions and lower long-term forecasted global ammonia prices, which resulted in the Company performing an impairment test to calculate the recoverable amount. The calculation of the recoverable amount of the Trinidad CGU involved estimates including forecasted production volumes, forecasted ammonia net selling price and the discount rate. We identified the calculation of the recoverable amount of the Trinidad CGU as a critical audit matter. A high degree of auditor judgment was required to evaluate the Company’s estimate of the forecasted production volumes, ammonia net selling price and discount rate used to calculate the recoverable amount of the Trinidad CGU. Minor changes to these assumptions could have had a significant effect on the Company’s calculation of the recoverable amount of the Trinidad CGU. Additionally, the audit effort associated with this estimate required specialized skills and knowledge. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the calculation of the recoverable amount of the Trinidad CGU. This included controls related to the determination of forecasted production volumes, ammonia net selling prices and the discount rate. We evaluated forecasted ammonia net selling prices by comparing to external forecasts. We evaluated forecasted production volumes by comparing to recent actual production, adjusted for the plant closure. We evaluated the current year actual ammonia net selling prices and production volumes by comparing to those assumptions used in the prior year forecast to assess the Company’s ability to accurately forecast. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s determination of the discount rate by comparing the inputs to the discount rate to publicly available market data and assessing the resulting discount rate. Chartered Professional Accountants We have served as the Company’s auditor since 2018. Calgary, Canada February 18, 2021 78 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information 2020 AT A GLANCE FIND OUT MORE AT NUTRIEN.COM In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 79 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF EARNINGS For the years ended December 31 NOTE 2020 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 (income) expenses Earnings before finance costs and income taxes Finance costs Earnings before income taxes Income tax (recovery) expense Net earnings Net earnings per share (“EPS”) Basic Diluted Weighted average shares outstanding for basic EPS Weighted average shares outstanding for diluted EPS 3 4 4 4 4 4 5 13, 14 6 7 8 9 9 9 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31 (net of related income taxes) Net earnings Other comprehensive income 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 on currency translation of foreign operations Other Other comprehensive income Comprehensive income (See Notes to the Consolidated Financial Statements) 2019 Note 2 20,084 768 13,814 5,502 2,505 404 292 104 120 215 1,862 554 1,308 316 992 1.70 1.70 20,908 855 14,814 5,239 2,813 429 204 69 824 (2) 902 520 382 (77) 459 0.81 0.81 569,657,000 569,686,000 582,269,000 583,102,000 2020 459 2019 992 75 (7) 142 (16) 194 653 7 (25) 47 7 36 1,028 80 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31 Operating activities Net earnings Adjustments for: Depreciation and amortization Share-based compensation Impairment of assets Net gain on disposal of investment in Misr Fertilizers Production Company S.A.E. (“MOPCO”) (Recovery of) provision for deferred income tax Other long-term assets, 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 investment in MOPCO Proceeds from disposal of discontinued operations, net of tax Purchase of investments Other Cash used in investing activities Financing activities Transaction costs on long-term debt (Repayment of) proceeds from 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 Increase (decrease) in cash and cash equivalents Cash and cash equivalents – beginning of year Cash and cash equivalents – end of year Cash and cash equivalents comprised of: Cash Short-term investments Supplemental cash flows information Interest paid Income taxes paid Total cash outflow for leases (See Notes to the Consolidated Financial Statements) NOTE 2020 2019 5 13, 14 15 16 13 14 25 15 17 18 18 18, 19 23 23 23 459 1,989 69 824 (250) (9) (333) 2,749 145 85 (10) 354 3,323 (1,423) (126) (233) 540 – (102) 140 (1,204) (15) (892) 1,541 (509) (274) (1,030) (160) – (1,339) 3 783 671 1,454 1,375 79 1,454 498 156 345 992 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 In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 81 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Accumulated Other Comprehensive (Loss) Income (“AOCI”) Number of Common Shares Share Capital Contributed Surplus Net Fair Value Loss on Investments Net Actuarial Gain on Defined Benefit Plans 1 Loss on Currency Translation of Foreign Operations Balance – December 31, 2018 Net earnings Other comprehensive (loss) income Shares repurchased (Note 23) 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 – 608,535,477 – 16,740 – – – (36,067,323) – (992) – 231 – – – – 474,655 23 17 – – – – – – – – – December 31, 2019 572,942,809 15,771 248 Net earnings Other comprehensive (loss) income Shares repurchased (Note 23) 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 cash flow hedges Balance – – – – – (3,832,580) – (105) – 150,177 – – 7 – – – – (55) – 12 – – (7) – (25) – – – – 3 – (29) – (7) – – – – – December 31, 2020 569,260,406 15,673 205 (36) – – 7 – – – (7) – – – – (251) – 47 – – – – – – (204) – Other Total AOCI Retained Earnings Total Equity 2 (33) – (291) – 7,745 992 24,425 992 7 – – – – – 8 36 – 36 – – – (7) 3 8 (886) (754) (1,878) (754) – 7 (3) – 40 – – 8 (18) (251) 7,101 22,869 – – 459 459 194 75 142 (16) 194 – – – – (75) – – – – – – – – – – – – – – (75) 13 13 – (1,029) (160) (1,029) – 75 – 19 – 13 (62) (21) (119) 6,606 22,365 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) 82 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-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 2020 2019 11 12 13 14 14 15 16 17 18 19 20 18 19 8 21 22 23 1,454 3,581 4,930 1,505 11,470 19,660 12,198 2,388 562 914 47,192 159 14 249 8,058 8,480 10,047 891 3,149 454 1,597 209 24,827 15,673 205 (119) 6,606 22,365 47,192 671 3,542 4,975 1,477 10,665 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 23,930 15,771 248 (251) 7,101 22,869 46,799 Director Director In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 83 Overview Management’s Discussion & Analysis Three-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, 2020, the Company had assets as follows: (cid:129) one large-scale operation in Trinidad (cid:129) six upgrade facilities in North America: three in Alberta and one each in Georgia, Missouri, and Washington (cid:129) 50 percent investment in Profertil S.A. (“Profertil”), a nitrogen NUTRIEN AG SOLUTIONS (“RETAIL”) producer based in Argentina (cid:129) various retail facilities across the US, Canada, Australia and South America PHOSPHATE (cid:129) private label and proprietary crop protection products and nutritionals (cid:129) an innovative integrated digital platform for growers and crop consultants POTASH (cid:129) two mines and processing plants: one in Florida and one in North Carolina (cid:129) phosphate feed plants in Illinois, Missouri and Nebraska (cid:129) an industrial phosphoric acid plant in Ohio CORPORATE AND OTHERS (cid:129) six operations in the province of Saskatchewan (cid:129) investment in Canpotex Limited (“Canpotex”), a Canadian NITROGEN potash export, sales and marketing company owned in equal shares by Nutrien and another potash producer (cid:129) eight production facilities in North America: four in Alberta (cid:129) 22 percent investment in Sinofert Holdings Limited and one each in Georgia, Louisiana, Ohio and Texas (“Sinofert”), a fertilizer supplier and distributor in China NOTE 2 Basis of Presentation These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). 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 the accounting standards adopted effective January 1, 2020, as disclosed in Note 30. Certain immaterial 2019 figures have been reclassified in the consolidated statements of earnings, segment information, nature of expenses and other (income) expenses. These consolidated financial statements were authorized for issue by the Board of Directors on February 18, 2021. 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. Details of our accounting policies are primarily disclosed in Note 30. 84 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 2 Basis of Presentation Continued On March 11, 2020, the World Health Organization declared the spread of the novel strain of coronavirus (“COVID-19”) a global pandemic. We have assessed our accounting estimates and other matters that require the use of forecasted financial information for the impact of the COVID-19 pandemic. The assessment included estimates of the unknown future impacts of the pandemic using information that is reasonably available at this time. Accounting estimates and other matters assessed include the allowance for expected credit losses of receivables from customers, valuation of inventory, goodwill and other long-lived assets, financial assets, tax assets, pension obligations and assets, and revenue recognition. Based on the current assessment, there was not a material impact to these consolidated financial statements. As a result of the pandemic, we incurred directly attributable and incremental COVID-19 related expenses in other (income) expenses (Note 6). As additional information becomes available, the future assessment of these estimates, including expectations about the severity, duration and scope of the pandemic, could differ materially in future reporting periods. NOTE 3 Segment Information The Company has four reportable operating segments: Nutrien Ag Solutions (“Retail”), Potash, Nitrogen and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seed and merchandise, and it provides services directly to growers through a network of farm centers in North America, South America and Australia. The Potash, Nitrogen and Phosphate segments are differentiated by the chemical nutrient contained in the products that each produce. The Executive Leadership Team (“ELT”), comprised of officers at the Executive Vice President level and above, is the Chief Operating Decision Maker (“CODM”). In 2020, the CODM changed the measure used to evaluate the performance of our operating segments from net earnings (loss) before finance costs, income taxes, and depreciation and amortization (“EBITDA”) to adjusted EBITDA. The CODM considers adjusted EBITDA to be a more 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 addition, it provides a better indication of the segment’s performance compared to EBITDA as it excludes the impact of impairments and other costs that are centrally managed by our corporate function. Due to the change in the measurement of the segments, we have presented adjusted EBITDA for the comparative period. We determine the composition of the reportable segments based on factors including risks and returns, internal organization, and internal reports reviewed by the CODM. We allocate certain expenses across segments based on reasonable considerations such as production capacities or historical trends. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 85 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 3 Segment Information Continued Financial information on each of these segments is summarized in the following tables: 2020 Retail Potash Nitrogen Phosphate Corporate and Others Eliminations Consolidated Sales – third party – intersegment Sales – total Freight, transportation and distribution Net sales Cost of goods sold Gross margin Selling expenses General and 14,748 37 14,785 – 14,785 11,049 3,736 2,795 administrative expenses 135 Provincial mining and other taxes Share-based compensation expense Impairment of assets (Note 13) Other expenses (income) Earnings (loss) before finance costs and income taxes Depreciation and amortization EBITDA Acquisition and integration related costs Share-based compensation expense Impairment of assets (Note 13) COVID-19 related expenses Foreign exchange loss, net of related derivatives Loss on disposal of business Net gain on disposal of investment in MOPCO (Note 15) 2,265 248 2,513 367 2,146 1,183 963 9 7 201 – 23 8 715 452 – – – 44 762 668 1,430 1,167 – – – – – – – – – 23 – – – – 2,572 628 3,200 460 2,740 2,265 475 27 8 1 – 27 (288) 1,241 202 1,443 241 1,202 1,166 36 6 10 – – 769 6 700 (755) 599 1,299 4 – 27 – – – (250) 218 (537) – – 769 – – – – 82 – 82 – 82 74 8 (24) 269 2 69 5 228 (541) 52 (489) 56 69 5 48 19 6 – Adjusted EBITDA 1,430 1,190 1,080 Assets 20,526 12,032 10,612 232 1,462 (286) 2,983 – (1,115) (1,115) (213) (902) (923) 21 – – – – – – 21 – 21 – – – – – – 20,908 – 20,908 855 20,053 14,814 5,239 2,813 429 204 69 824 (2) 902 1,989 2,891 60 69 824 48 19 6 – 21 (423) (250) 3,667 47,192 86 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 3 Segment Information Continued 2019 Sales – third party – intersegment Sales – total Freight, transportation and distribution 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 13 and 14) Other expenses (income) Earnings (loss) before finance costs and income taxes Depreciation and amortization EBITDA Merger and related costs Acquisition and integration related costs Share-based compensation expense Impairment of assets (Note 13 and 14) Foreign exchange loss, net of related derivatives Adjusted EBITDA Assets Retail Potash Nitrogen Phosphate Corporate and Others Eliminations Consolidated 13,244 38 13,282 – 13,282 9,981 3,301 2,484 112 – – – 69 636 595 1,231 – – – – – 2,702 207 2,909 305 2,604 1,103 1,501 9 6 287 – – (4) 1,203 390 1,593 – – – – – 2,608 612 3,220 372 2,848 2,148 700 25 15 2 – – (46) 704 535 1,239 – – – – – 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 10,991 194 2,198 133 – 133 – 133 133 – (18) 264 2 104 120 171 (643) 42 (601) 82 16 104 120 42 (237) 2,129 – (1,060) (1,060) (141) (919) (924) 5 – – – – – – 5 – 5 – – – – – 5 (205) 20,084 – 20,084 768 19,316 13,814 5,502 2,505 404 292 104 120 215 1,862 1,799 3,661 82 16 104 120 42 4,025 46,799 Our Retail segment primarily generates revenue from sales of the following: Crop nutrients Crop protection products Seed Merchandise Nutrien Financial Services and other revenues 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. Financing solutions provided to Retail branches and customers in support of Nutrien’s agricultural product and service sales. Product application, soil and leaf testing, crop scouting and precision agriculture services, water services and livestock marketing. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 87 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 3 Segment Information Continued Our Potash, Nitrogen and Phosphate segments generate revenue from sales of the following products: Potash (cid:129) North American – primarily granular (cid:129) North American prices referenced at Products Sales prices impacted by (cid:129) Offshore (international) – primarily granular and standard Nitrogen (cid:129) Ammonia, urea, urea ammonium nitrate, industrial grade ammonium nitrate and ammonium sulfate delivered prices (including transportation and distribution costs) (cid:129) International prices pursuant to term and spot contract prices (excluding transportation and distribution costs) (cid:129) Global energy costs and supply Phosphate (cid:129) Solid fertilizer, liquid fertilizer, industrial products (cid:129) Global prices and supplies of ammonia and sulfur and feed products Revenue reported under our Corporate and Others segment primarily relates to our non-core Canadian business, which was sold in 2020. Presented below is revenue from contracts with customers disaggregated by product line or geographic location for each reportable segment. Retail sales by product line Crop nutrients Crop protection products Seed Merchandise Nutrien Financial Services and other Nutrien Financial elimination 1 Potash sales by geography Manufactured product North America Offshore 2 Other potash and purchased products Nitrogen sales by product line Manufactured product Ammonia Urea Solutions, nitrates and sulfates Other nitrogen and purchased products Phosphate sales by product line Manufactured product Fertilizer Industrial and feed Other phosphate and purchased products 2020 2019 5,200 5,602 1,790 943 129 1,241 (120) 4,989 4,983 1,712 598 – 1,000 – 14,785 13,282 1,275 1,238 – 2,513 779 1,040 816 565 3,200 838 454 151 1,283 1,625 1 2,909 884 1,019 812 505 3,220 944 475 181 1,443 1,600 1 Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches. 2 Relates to Canpotex (Note 28). 88 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 3 Segment Information Continued Financial information by geographic area is summarized in the following tables: United States Canada Australia Canpotex (Note 28) Trinidad Other Sales – Third Party Non-Current Assets 1 2020 12,373 2,565 3,231 1,238 101 1,400 2 20,908 2019 12,561 2,504 1,961 1,625 113 1,320 2 20,084 2020 15,268 17,435 1,305 – 644 564 35,216 2019 15,685 17,503 1,172 – 691 639 35,690 1 Excludes financial instruments (other than equity-accounted investees), deferred tax assets and post-employment benefit assets. 2 Other third-party sales primarily relate to Argentina of $372 (2019 – $404), Brazil of $284 (2019 – $109), Europe of $183 (2019 – $210), and Others of $561 (2019 – $597). Canpotex sales volumes by geographical area were as follows: Canpotex Sales by market (%) Latin America China India Other Asian markets Other markets NOTE 4 Nature of Expenses Purchased and produced raw materials and product for resale 1 Depreciation and amortization Employee costs 2 Freight Impairment of assets (Note 13 and 14) Provincial mining and other taxes 3 Offsite warehouse costs Merger and related costs Acquisition and integration related costs Contract services Lease expense 4 Fleet fuel, repairs and maintenance COVID-19 related expenses Net gain on disposal of investment in MOPCO (Note 15) Other Total cost of goods sold and expenses 2020 2019 32 22 14 25 7 2020 12,110 1,989 2,450 963 824 204 60 – 60 617 60 222 48 (250) 649 20,006 31 22 10 27 10 2019 11,335 1,799 2,205 845 120 292 51 82 16 567 66 202 – – 642 18,222 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. 3 Includes Saskatchewan potash production tax, and Saskatchewan resource surcharge and other of $86 and $118 (2019 – $190 and $102), respectively, as required under Saskatchewan provincial legislation. 4 Includes lease expense relating to short-term leases, leases of low value and variable lease payments. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 89 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 5 Share-based Compensation We have share-based compensation plans (including those assumed from Potash Corporation of Saskatchewan Inc. (“PotashCorp”) and Agrium Inc. (“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”). 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: Plans Stock Options PSUs RSUs DSUs SARs/TSARs 2 Eligibility Officers and eligible employees Officers and eligible employees Granted Annually Annually Eligible employees Annually Non-executive directors Awards no longer granted; legacy awards only At the discretion of the Board of Directors Awards no longer granted; legacy awards only Vesting Period Maximum Term Settlement 25% per year over four years 10 years Shares 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 Not applicable Cash Not applicable Cash Not applicable Cash 1 25% per year over four years 10 years Cash 1 Directors can redeem their DSUs for cash only when they leave the Board of Directors for an amount equal to the market value of the common shares at the time of redemption or as mandated by the Nutrien DSU Plan. 2 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 2020 was $7.18 (2019 – $11.27). The weighted average assumptions by year of grant that impacted current year results are as follows: Assumptions Based On Exercise price per option Expected annual dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Average expected life of options (years) 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 the 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 2020 42.23 4.36 29 1.51 8.5 2019 53.54 3.22 27 2.55 7.5 90 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 5 Share-based Compensation Continued The following table summarizes the activity related to our stock option plans: Number of Shares Subject to Option Weighted Average Exercise Price Outstanding – beginning of year Granted Exercised Forfeited or cancelled Expired 2020 2019 9,191,480 2,293,802 (123,403) (34,506) (329,481) 9,044,237 1,376,533 (451,574) (502,016) (275,700) Outstanding – end of year 10,997,892 9,191,480 2020 56.88 42.23 42.24 57.45 75.92 53.59 2019 58.41 53.54 42.73 86.53 76.59 56.88 The aggregate grant-date fair value of all stock options granted in 2020 was $16. The average share price in 2020 was $38.87 per share. The following table summarizes information about our stock options outstanding as at December 31, 2020, with expiry dates ranging from May 2021 to February 2030: Range of Exercise Prices $37.84 to $41.60 $41.61 to $43.36 $43.37 to $45.40 $45.41 to $52.75 $52.76 to $78.86 $78.87 to $130.78 Options Outstanding Options Exercisable Weighted Average Remaining Life in Years Weighted Average Exercise Price 5 9 7 5 7 2 6 38.71 42.23 44.50 48.74 57.60 94.31 53.59 Weighted Average Exercise Price 38.71 – 44.50 48.91 61.68 94.31 57.97 Number 1,647,297 – 1 988,275 2,098,294 821,067 1,678,901 7,233,834 Number 1,647,297 2,293,802 1,492,667 2,239,358 1,645,867 1,678,901 10,997,892 1 Options granted in this range of exercise prices have not yet met the vesting period. Information for all employee and director share-based compensation plans is summarized below: Stock Options PSUs RSUs DSUs SARs/TSARs Units Granted in 2020 Units Outstanding as at December 31, 2020 2,293,802 794,017 486,194 49,424 – 10,997,892 1,879,160 1,304,858 369,267 1,576,172 Compensation Expense 2020 14 31 22 2 – 69 2019 19 65 18 2 – 104 In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 91 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 6 Other (Income) Expenses Merger and related costs Acquisition and integration related costs Foreign exchange loss, net of related derivatives Earnings of equity-accounted investees Bad debt expense COVID-19 related expenses Loss on disposal of business Net gain on disposal of investment in MOPCO (Note 15) Other expenses NOTE 7 Finance Costs Interest expense Short-term debt Long-term debt Lease liabilities (Note 19) COVID-19 related Unwinding of discount on asset retirement obligations (Note 22) Interest on net defined benefit pension and other post-retirement plan obligations (Note 21) Borrowing costs capitalized to property, plant and equipment Interest income 2020 – 60 18 (73) 6 48 6 (250) 183 (2) 2019 82 16 42 (66) 24 – – – 117 215 2020 2019 50 392 34 19 33 13 (20) (1) 520 87 387 34 – 54 15 (18) (5) 554 Borrowing costs capitalized to property, plant and equipment in 2020 were calculated by applying an average capitalization rate of 3.9 percent (2019 – 4.6 percent) to expenditures on qualifying assets. 92 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 8 Income Taxes Income Taxes Included in Net Earnings We operate in a specialized industry and in several tax jurisdictions; as a result, our earnings are subject to various rates of taxation. 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: Recovery of prior year taxes due to US legislative changes Non-taxable income Change in recognition of tax losses and deductible temporary differences Impact of foreign tax rates Production-related deductions Impact of tax rate changes Non-deductible expenses Foreign accrual property income Other Income tax (recovery) expense included in net earnings Total income tax (recovery) expense, included in net earnings, was comprised of the following: Current income tax Tax (recovery) expense for current year Adjustments in respect of prior years Total current income tax (recovery) expense Deferred income tax Origination and reversal of temporary differences Adjustments in respect of prior years Change in recognition of tax losses and deductible temporary differences Impact of tax rate changes Total deferred income tax (recovery) expense Income tax (recovery) expense included in net earnings 2020 525 (506) 83 (44) 324 382 27 103 (94) (59) (20) (18) (12) (3) 13 7 6 (77) 2019 765 315 27 (28) 229 1,308 27 353 – (19) – (45) (17) 16 15 18 (5) 316 2020 2019 (38) (30) (68) 72 (58) (20) (3) (9) (77) 161 (22) 139 152 9 – 16 177 316 In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 93 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 8 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 (recovery) expense recognized in net earnings were: Deferred Income Tax (Assets) Liabilities Deferred Income Tax (Recovery) Expense Recognized in Net Earnings 2020 2019 2020 2019 (376) (370) (201) (161) (102) (50) (37) – (12) 3,637 471 72 36 2,907 (387) (270) (227) (168) (107) (51) (59) (25) (22) 3,647 523 – 42 2,896 Deferred income tax assets Asset retirement obligations and accrued environmental costs Tax loss and other carryforwards Lease liabilities Pension and other post-retirement benefit liabilities Long-term debt Receivables Inventories Payables and accrued charges Other assets Deferred income tax liabilities Property, plant and equipment Goodwill and other intangible assets Payables and accrued charges Other liabilities Reconciliation of net deferred income tax liabilities: Balance – beginning of year Business acquisitions (Note 25) Income tax (recovery) expense recognized in net earnings Income tax charge recognized in other comprehensive income (“OCI”) Other Balance – end of year 20 (98) 26 (12) 3 2 20 25 17 (12) (67) 72 (5) (9) 2020 2,896 – (9) 17 3 2,907 25 (9) 55 (14) 3 7 (5) (5) 14 147 (58) – 17 177 2019 2,691 29 177 2 (3) 2,896 Amounts and expiry dates of unused tax losses and unused tax credits as at December 31, 2020, were: Unused federal operating losses Unused federal capital losses Unused investment tax credits Amount Expiry Date 1,425 583 23 2021 – Indefinite Indefinite 2021 – 2040 The unused tax losses and credits with no expiry dates can be carried forward indefinitely. equity-accounted investees amounting to $8,911 as at December 31, 2020 (2019 – $9,183). As at December 31, 2020, we had $735 of federal 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. We did not recognize deferred tax liabilities related to temporary differences associated with investments in subsidiaries and In 2020, previously unrecognized capital losses were utilized primarily as a result of the net gain on disposal of investment in MOPCO. In addition, as a result of the non-cash impairment of assets relating to our property, plant and equipment at White Springs, management revised its estimate of future taxable profits and derecognized deferred tax assets related to Florida tax losses and deductible temporary differences. In aggregate, the net decrease in unrecognized deferred tax assets was $20. 94 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 9 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 2020 569,657,000 29,000 – 569,686,000 2019 582,269,000 777,000 56,000 583,102,000 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 2020 9,875,797 2011 – 2017 2015, 2017 – 2020 2019 4,539,529 2010 – 2015 2015, 2019 NOTE 10 Financial Instruments and Related Risk Management Our ELT, along with the Board of Directors (including Board of Directors Committees), is responsible for monitoring our risk exposures and managing our policies to address these risks. Our strategic and risk management processes are integrated to ensure we understand the benefit from the relationship between strategy, risk and value creation. Outlined below are our risk management strategies we have developed to mitigate the financial market risks which we are exposed to. Credit Risk Receivables from customers Risk Management Strategies (cid:129) establish credit approval policies and procedures for new and existing customers (cid:129) extend credit to qualified customers through: (cid:129) review of credit agency reports, financial statements and/or credit references, as available (cid:129) review of existing customer accounts every 12 – 24 months based on the credit limit amounts (cid:129) evaluation of customer and country risk for international customers (cid:129) establish credit period: (cid:129) 15 and 30 days for wholesale fertilizer customers (cid:129) 30 days for industrial and feed customers (cid:129) 30 – 360 days for Retail, including Nutrien Financial, customers (cid:129) up to 180 days for select export sales customers, including Canpotex (cid:129) transact on a cash basis with certain customers who may not meet specified benchmark creditworthiness or cannot provide other evidence of ability to pay (cid:129) execute an agency arrangement with a financial institution with which we have only a limited recourse involvement (cid:129) sell receivables to financial institutions which substantially transfer the risks and rewards (cid:129) set eligibility requirements for Nutrien Financial to limit the risk of the receivables (cid:129) may require security over certain crop or livestock inventories (cid:129) set up provision using the lifetime expected credit loss method considering all possible default events over the expected life of a financial instrument. Receivables are grouped based on days past due and/or customer credit risk profile. Estimated losses on receivables are based on known troubled accounts and historical experience of losses incurred. 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 Cash and cash equivalents and derivative assets (cid:129) require acceptable minimum counterparty credit ratings (cid:129) limit counterparty or credit exposure (cid:129) select counterparties with investment-grade quality In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 95 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 10 Financial Instruments and Related Risk Management Continued Maximum exposure to credit risk as at December 31: Cash and cash equivalents Receivables 1 Other current assets – derivatives 1 Excluding income tax receivable. 2020 1,454 3,498 45 4,997 2019 671 3,438 5 4,114 Risk Risk Management Strategies Liquidity (cid:129) establish an external borrowing policy to maintain sufficient liquid financial resources to fund our operations and meet our commitments and obligations in a cost-effective manner (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 (cid:129) uphold long-term relationships with a sufficient number of high-quality and diverse lenders Refer to Note 17 for our available credit facilities. 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. 2020 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 159 5,781 10,061 1,140 48 17,189 159 5,781 15,795 1,305 48 23,088 Within 1 Year 159 5,781 434 281 39 6,694 1 to 3 Years – – 2,378 408 9 2,795 3 to 5 Years – – 2,498 233 – 2,731 Over 5 Years – – 10,485 383 – 10,868 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, 2020. 2 Excludes non-financial liabilities and includes trade payables of approximately $1.5 billion that are related to our prepaid inventory to secure product discounts. We consider these amounts to be part of our working capital. For these payables, we participated in arrangements where the vendors sold their right to receive payment to financial institutions without extending the original payment terms. These payables were paid in January and February 2021. 96 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 10 Financial Instruments and Related Risk Management Continued Foreign Exchange Risk Foreign currency denominated accounts Risk Management Strategies (cid:129) execute foreign currency derivative contracts within certain prescribed limits for both forecast operating and capital expenditures to manage the earnings impact, including those related to our equity-accounted investees, that could occur from a reasonably possible strengthening or weakening of the US dollar The fair value of our net foreign exchange currency derivative assets (liabilities) at December 31, 2020 was $14 (2019 – $2). The following table presents the significant foreign currency derivatives that existed at December 31: 2020 2019 Sell/buy Notional Maturities Derivatives not designated as hedges Average contract rate 1.2796 1.2804 1.3661 1.3640 1.3147 1.3665 1.3216 Notional Maturities 337 120 78 47 – – – – 2020 2020 2020 2020 – – – – Average contract rate 1.3096 1.3138 1.4593 1.4563 – – – – 514 126 28 92 70 55 61 2021 2021 2021 2021 2021 2021 2021 254 2021 1.3190 Forwards USD/CAD 1 CAD/USD USD/AUD 2 AUD/USD Options USD/CAD – buy USD puts USD/CAD – sell USD calls AUD/USD – buy USD calls Derivatives designated as hedges Forwards USD/CAD 1 Canadian Dollar 2 Australian Dollar Market Risks Type Risk Management Strategies Interest rate Price Price Short-term and long- term debt Natural gas derivative instruments (cid:129) use a portfolio of fixed and floating rate instruments (cid:129) align current and long-term assets with demand and fixed-term debt (cid:129) monitor the effects of market changes in interest rates (cid:129) use interest rate swaps, if desired (cid:129) 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 (cid:129) acquire a reliable supply of natural gas feedstock and fuel on a location-adjusted, cost-competitive basis Investment at fair value (cid:129) ensure the security of principal amounts invested (cid:129) provide for an adequate degree of liquidity (cid:129) achieve a satisfactory return We do not believe we have material exposure to interest or price risk on our financial instruments as at December 31, 2020 and 2019. In 2020, we entered into cash flow hedges on our interest rate derivative contracts which matured in the same year and had a total notional amount of $680. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 97 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 10 Financial Instruments and Related Risk Management Continued Natural gas derivatives outstanding: Notional 1 NYMEX swaps 14 2020 2019 Average Contract Price 2 Fair Value of Assets (Liabilities) Notional 1 3.89 (18) 16 Average Contract Price 2 Fair Value of Assets (Liabilities) 4.26 (30) Maturities 2020 – 2022 Maturities 2021 – 2022 1 In millions of Metric Million British Thermal Units (“MMBtu”). 2 US dollars per MMBtu. 2020 2019 Financial assets (liabilities) Gross Offset Derivative instrument liabilities Natural gas derivatives 1 Other long-term debt instruments 2 (18) (150) (168) – 150 150 Net Amounts Presented (18) – (18) Gross Offset (30) (150) (180) – 150 150 Net Amounts Presented (30) – (30) 1 Cash margin deposits of $9 (2019 – $17) 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, 2020. Fair Value Financial instruments included in the consolidated balance sheets are measured either at fair value or amortized cost. The following tables 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 at Fair Value Fair Value Method Cash and cash equivalents Equity securities Debt securities Foreign currency derivatives not traded in an active market Foreign exchange forward contracts, swaps and options and natural gas swaps 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 Based on a discounted cash flow model. 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. Financial Instruments at Amortized Cost Receivables, short-term debt and payables and accrued charges Long-term debt Other long-term debt instruments Fair Value Method 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) Carrying amount 98 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 10 Financial Instruments and Related Risk Management Continued The following table presents our fair value hierarchy for financial instruments carried at fair value on a recurring basis or measured at amortized cost: Financial assets (liabilities) measured at Fair value on a recurring basis Cash and cash equivalents Derivative instrument assets Other current financial assets – marketable securities 2 Investment at fair value through other comprehensive income (“FVTOCI”) (Note 15) 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 Carrying Amount 1,454 45 161 153 (48) – (14) 2020 2019 Level 1 1 Level 2 1 Carrying Amount Level 1 1 Level 2 1 – – 24 153 – – – 1,454 45 137 – (48) – (14) 671 5 193 161 (33) (494) (8) – – 27 161 – – – 671 5 166 – (33) (503) (8) (9,994) (53) (3,801) – (7,955) (53) (8,528) (25) (1,726) – (7,440) (25) 1 During 2020 and 2019, 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. NOTE 11 Receivables Segment 2020 2019 Retail (Nutrien Financial) 1 Retail Potash, Nitrogen, Phosphate Potash (Note 28) Receivables from customers Third parties Related party – Canpotex Less allowance for expected credit losses of receivables from customers Rebates Income taxes (Note 8) Other receivables 1,417 1,158 391 122 826 1,682 428 194 (69) (83) 3,019 256 83 223 3,581 3,047 190 104 201 3,542 1 Includes $1,147 of very low risk of default and $270 of low risk of default (2019 – $762 of very low risk of default and $64 of low risk of default). In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 99 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 11 Receivables Continued Qualifying receivables from customers financed by Nutrien Financial represents high-quality receivables from customers that have been rated very low to low risk of default among Retail’s receivables from customers. Customer credit with a financial institution of $444 at December 31, 2020, related to our agency agreement, is not recognized in our consolidated balance sheets. Through the agency agreement, we only have a limited recourse involvement to the extent of an indemnification of the financial institution to a maximum of 5 percent (2019 – 5 percent) of the qualified customer loans. Historical indemnification losses on this arrangement have been negligible, and the average aging of the customer loans with the financial institution is current. NOTE 12 Inventories Product purchased for resale 1 Finished products Intermediate products Raw materials Materials and supplies 2020 3,655 384 227 215 449 4,930 2019 3,592 524 244 205 410 4,975 1 Includes biological assets of $7 (December 31, 2019 – $33) measured at fair value less costs of disposal (“FVLCD”). Inventories expensed to cost of goods sold during the year were $14,347 (2019 – $13,465). 100 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 13 Property, Plant and Equipment The majority of our tangible assets are buildings, machinery and equipment used to produce or distribute our products and render our services. Right-of-use (“ROU”) assets primarily include railcars, marine vessels, real estate and mobile equipment. Land and Improvements Buildings and Improvements Machinery and Equipment Mine Development Costs Assets Under Construction Useful life range (years) Carrying amount – December 31, 2019 Acquisitions (Note 25) Additions Additions – ROU assets Disposals Transfers Foreign currency translation and other Depreciation Depreciation – ROU assets Impairment Carrying amount – December 31, 2020 Balance – December 31, 2020 comprised of: Cost Accumulated depreciation and impairments Carrying amount – December 31, 2020 Balance – December 31, 2020 comprised of: Owned property, plant and equipment ROU assets Carrying amount – December 31, 2020 Carrying amount – December 31, 2018 ROU assets recognized on adoption of IFRS 16, “Leases” (“IFRS 16”) Acquisitions (Note 25) Additions Additions – ROU assets Disposals Transfers Foreign currency translation and other Depreciation Depreciation – ROU assets Impairment 2 – 80 1,160 8 25 – (5) 46 (15) (39) (2) (88) 1,090 1,530 (440) 1,090 1,061 29 1,090 1,018 48 17 14 – (3) 108 (4) (36) (2) – 1 – 60 6,409 27 91 24 (9) 58 – (198) (55) (42) 6,305 1 – 80 10,641 42 224 299 (34) 923 30 (1,060) (222) (507) 10,336 2 – 60 747 – 1 – – 164 30 (82) – (137) 723 8,377 19,730 2,279 (2,072) 6,305 (9,394) 10,336 (1,556) 723 5,986 319 6,305 6,044 307 136 30 22 (5) 145 (37) (187) (46) – 9,665 671 10,336 9,882 704 61 225 177 (84) 932 (14) (1,004) (186) (52) 723 – 723 709 – – – – – 110 5 (77) – – 747 n/a 1,378 – 1,077 – – (1,191) (10) – – (48) 1,206 1,206 – 1,206 1,206 – 1,206 1,143 – 37 1,487 – – (1,295) 6 – – Total 20,335 77 1,418 323 (48) – 35 (1,379) (279) (822) 19,660 33,122 (13,462) 19,660 18,641 1,019 19,660 18,796 1,059 251 1,756 199 (92) – (44) (1,304) (234) (52) Carrying amount – December 31, 2019 1,160 6,409 10,641 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 n/a = not applicable 1,474 (314) 1,160 1,117 43 1,160 8,207 18,548 2,068 (1,798) 6,409 (7,907) 10,641 (1,321) 747 6,065 344 6,409 9,973 668 10,641 747 – 747 1,378 20,335 1,378 – 1,378 1,378 – 1,378 31,675 (11,340) 20,335 19,280 1,055 20,335 In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 101 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 13 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 2020 138 1,111 393 56 1,698 132 1,830 2019 137 1,008 344 40 1,529 161 1,690 Impairment In 2020, we recorded the following impairments: Cash-generating units (“CGUs”) Segment Impairment indicator Pre-tax impairment loss ($) Recoverable amount ($) Valuation technique Key assumptions Aurora White Springs Phosphate Lower long-term forecasted global phosphate prices 545 995 (post-tax) FVLCD a Level 3 measurement 215 160 (pre-tax) Value in use (“VIU”) End of mine life (proven and probable reserves) (year) Post-tax discount rate (%) 2050 10.5 2029 12.0 (pre-tax – 16.0) For our Aurora CGU, the recoverable amount was based on after-tax discounted cash flows (using a five-year projection and a terminal year thereafter to the expected mine life), which incorporated assumptions an independent market participant would apply. For our White Springs CGU, the recoverable amount was based on pre-tax discounted cash flows until the end of the mine life. The recoverable amount is most sensitive to the following key assumptions: our internal sales price forecasts, which consider projections from independent third-party data sources, discount rates, and expected mine life. We used key assumptions that were based on historical data and estimates of future results from internal sources, external price benchmarks, and mineral reserve technical reports, as well as industry and market trends. The following table highlights sensitivities to the recoverable amount which could result in additional impairment losses or reversals of previously recorded losses: Key Assumptions Net selling price Discount rate Change in Assumption Increase (Decrease) to Recoverable Amount ($) Aurora ± ± 10 per tonne ± 1.0 percentage point ± 150 120 102 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 13 Property, Plant and Equipment Continued For our White Springs CGU, there were no reasonably possible changes in the key assumptions that would result in a substantial change in the recoverable amount. We also performed impairment testing on the Trinidad CGU, part of our Nitrogen segment, due to the indefinite closure of an ammonia plant in response to market conditions and lower long-term forecasted global ammonia prices. No impairment resulted from comparing the carrying amount of the Trinidad CGU to its recoverable amount determined on a FVLCD methodology. FVLCD was based on after-tax discounted cash flows (using a five-year projection and a 2.0% terminal growth rate) discounted at a post-tax rate of 12.6%. The following table indicates the percentages by which key assumptions would need to change individually for the estimated Trinidad CGU recoverable amount to be equal to the carrying amount: Key Assumptions Net selling price (5-year average) Production volumes (5-year average) Discount rate (post-tax) Change Required for Carrying Amount to Equal Recoverable Amount 4 percent decrease 5 percent decrease 0.9 percentage point increase In 2020, we also recorded $64 of impairment losses relating to other non-current assets (2019 – $52). NOTE 14 Goodwill and Other Intangible Assets Customer Relationships 2 3 – 15 Technology 3 – 30 Other Intangibles Trade Names 1 – 20 3 Other 1 – 20 Useful life range (years) Carrying amount – December 31, 2019 Acquisitions (Note 25) Additions – internally developed Foreign currency translation and other Disposals Amortization 1 Carrying amount – December 31, 2020 Goodwill n/a 11,986 167 – 45 – – 12,198 Balance – December 31, 2020 comprised of: Cost Accumulated amortization and impairment 12,205 1,971 (7) Carrying amount – December 31, 2020 12,198 Carrying amount – December 31, 2018 Acquisitions (Note 25) Additions – internally developed Foreign currency translation and other Impairment Amortization 1 Carrying amount – December 31, 2019 11,431 543 – 12 – – 11,986 Balance – December 31, 2019 comprised of: Cost Accumulated amortization and impairment Carrying amount – December 31, 2019 11,986 11,993 1,906 (7) (322) 1,584 1,584 74 – 22 – (165) 1,515 (456) 1,515 1,554 173 – 2 – (145) 1,584 351 2 106 20 (3) (39) 437 544 (107) 437 117 43 197 9 – (15) 351 429 (78) 351 62 8 – 14 – (9) 75 111 (36) 75 90 13 – 18 (35) (24) 62 92 (30) 62 431 6 16 (22) – (70) 361 597 (236) 361 449 115 2 (25) (33) (77) 431 597 (166) 431 Total 2,428 90 122 34 (3) (283) 2,388 3,223 (835) 2,388 2,210 344 199 4 (68) (261) 2,428 3,024 (596) 2,428 1 Amortization of $254 was included in selling expenses during the year ended December 31, 2020 (2019 – $234). 2 The average remaining amortization period of customer relationships at December 31, 2020, was approximately 6 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 unless otherwise noted 2020 Nutrien Annual Report 103 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 14 Goodwill and Other Intangible Assets Continued Goodwill Impairment Testing We performed our annual impairment test on goodwill 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 a CGU or 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 CGU or group of CGUs for the risk associated with achieving our forecasts (five-year projections) and for the country risk premium 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 CGU or 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 (%) 2020 2019 2020 2019 2.5 2.0 2.5 2.0 2.5 2.0 2.5 2.0 7.5 7.8 – 16.0 8.0 8.0 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. The Retail – North America group of CGUs recoverable amount exceeds its carrying amount by $1.7 billion, which is 13% of the carrying amount. Most of our goodwill arose from the merger between PotashCorp and Agrium in 2018 (the “Merger”), representing fair values at the merger date. 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 EBITDA could cause impairment in the future. The following table indicates the percentage by which key assumptions would need to change individually for the estimated recoverable amount to be equal to the carrying amount: Key Assumptions Terminal growth rate Forecasted EBITDA over forecast period Discount rate Change Required for Carrying Amount to Equal Recoverable Amount 0.8 percentage point decrease 9.1 percent decrease 0.7 percentage point increase Value Used in Impairment Model 2.5% $6 billion 7.5% 104 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 15 Investments Equity-accounted investees and investments at FVTOCI as at December 31 were comprised of: Name Principal Activity Equity-accounted investees MOPCO Profertil Canpotex Other associates and joint ventures Nitrogen Producer Nitrogen Producer Marketing and Logistics Total equity-accounted investees Investments at FVTOCI Sinofert Fertilizer Supplier and Distributor Total investments at FVTOCI Principal Place of Business and Incorporation Proportion of Ownership Interest and Voting Rights Held (%) Carrying Amount 2020 2019 2020 2019 Egypt Argentina Canada – 50 50 26 50 50 China/Bermuda 22 22 – 233 – 176 409 153 153 270 212 – 178 660 161 161 In 2020, as a result of our strategic decision to dispose of our investment in MOPCO, we received cash consideration of $540 for the disposal of the investment and settlement of legal claims. This resulted in a pre-tax gain of $250 recorded in other (income) expenses. 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 elected to account for our investment in Sinofert as FVTOCI as it is held for strategic purposes. Future conditions related to Profertil may be affected by political, economic and social instability. We are exposed to foreign exchange risk related to fluctuations in the Argentine peso against the US dollar. This may also restrict our ability to obtain dividends from Profertil. NOTE 16 Other Assets Other assets as at December 31 were comprised of: Deferred income tax assets (Note 8) Ammonia catalysts – net of accumulated amortization of $76 (2019 – $71) Long-term income tax receivable (Note 8) Accrued pension benefit assets (Note 21) Other – net of accumulated amortization of $44 (2019 – $41) 2020 242 89 305 109 169 914 2019 249 89 36 25 165 564 In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 105 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 17 Short-Term Debt 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: Rate of Interest (%) Total Facility Limit as at December 31, 2020 2020 2019 Credit facilities Unsecured revolving term credit facility 1 Uncommitted revolving demand facility Other credit facilities 2 Commercial paper Nil Nil 0.8 – 36.0 Nil 4,500 500 740 – – 159 – 159 – – 326 650 976 1 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. 2 Credit facilities are unsecured and consist of South American facilities with debt of $109 (2019 – $149) and interest rates ranging from 1.7 percent to 36.0 percent, Australian facilities with debt of $19 (2019 – $157) and an interest rate of 0.8 percent, and other facilities with debt of $31 (2019 – $20) and an interest rate of 1.0 percent. The amount available under the commercial paper program is limited to the availability of backup funds under the Nutrien Credit Facility and excess cash invested in highly liquid securities. As at December 31, 2020, we were authorized to issue commercial paper up to $4,500 (2019 – $4,500). Principal covenants and events of default under the Nutrien Credit Facility include a debt to capital ratio (refer to Note 24) 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, 2020. In 2020, we entered into new committed revolving credit facilities totaling approximately $1,500, all with the same principal covenants and events of default as our existing credit facilities. We closed these credit facilities after the issuance of the new notes as described in Note 18. 106 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 18 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. Long-term debt as at December 31 was comprised of: Rate of Interest (%) Maturity 2020 2019 Notes 1 4.875 3.150 1.900 3.500 3.625 3.375 3.000 4.000 4.200 2.950 4.125 7.125 5.875 5.625 6.125 4.900 5.250 5.000 3.950 7.800 March 30, 2020 October 1, 2022 May 13, 2023 June 1, 2023 March 15, 2024 March 15, 2025 April 1, 2025 December 15, 2026 April 1, 2029 May 13, 2030 March 15, 2035 May 23, 2036 December 1, 2036 December 1, 2040 January 15, 2041 June 1, 2043 January 15, 2045 April 1, 2049 May 13, 2050 February 1, 2027 – 500 500 500 750 550 500 500 750 500 450 300 500 500 500 500 500 750 500 125 67 9,742 404 (85) 10,061 (14) – (14) 10,047 500 500 – 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 Debentures 1 Other Add net unamortized fair value adjustments Less net unamortized debt issue costs Less current maturities 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. As calculated in Note 24, we were in compliance with these covenants as at December 31, 2020. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 107 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 18 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 Current Portion of Lease Liabilities Long-Term Debt Lease Liabilities 1,478 (1,401) – 11 85 173 1,624 – (794) – 500 148 1,478 214 (274) 107 194 8 249 8 196 (234) 50 178 16 214 8,553 1,526 – (11) (21) 10,047 7,579 – 1,481 – (500) (7) 8,553 859 – 213 (194) 13 891 12 863 – 75 (178) 87 859 Total 11,104 (149) 320 – 85 11,360 9,223 1,059 453 125 – 244 11,104 Balance – December 31, 2019 Cash flows 1 Additions and other adjustments to ROU assets Reclassifications Foreign currency translation and other non-cash changes Balance – December 31, 2020 Balance – December 31, 2018 Adoption of IFRS 16 (Note 13) Cash flows 1 Additions and other adjustments to ROU assets Reclassifications Foreign currency translation and other non-cash changes Balance – December 31, 2019 1 Cash inflows and cash outflows are presented on a net basis. NOTE 19 Lease Liabilities Lease liabilities – non-current Current portion of lease liabilities Total NOTE 20 Payables and Accrued Charges Average Rate of Interest (%) 3.0 2.7 2020 891 249 1,140 2019 859 214 1,073 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 and other payables Customer prepayments Dividends Accrued compensation Current portion of asset retirement obligations and accrued environmental costs (Note 22) Accrued interest Current portion of share-based compensation (Note 5) Current portion of derivatives Income taxes (Note 8) Current portion of pension and other post-retirement benefits (Note 21) Other accrued charges and others 2020 4,415 1,800 256 513 162 99 95 39 48 15 616 8,058 2019 4,016 1,693 258 434 148 103 118 13 43 15 596 7,437 108 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 21 Pension and Other Post-Retirement Benefits 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. 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 Canada (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, (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. Supplemental Plans in US and Canada for Senior Management (cid:129) non-contributory, (cid:129) unfunded, and (cid:129) supplementary pension benefits. requirements of the Employee Retirement Income Security Act of 1974 and associated Internal Revenue Service regulations and procedures. (cid:129) made to meet or exceed minimum funding requirements based on provincial statutory requirements and associated federal taxation rules. (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 practices in each country, as is the nature of the relationship between the Company and the trustees and their composition. Description of Other Post-Retirement Plans (cid:129) for certain plans, maximum lifetime benefits; 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) coordination with government-provided medical insurance in each country; (cid:129) certain unfunded cost-sharing features such as co-insurance, deductibles and co-payments – benefits subject to change; (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 toward annual cost of the plans. We provide non-contributory life insurance plans for certain retired employees who meet specific age and service eligibility requirements. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 109 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 21 Pension and Other Post-Retirement Benefits Continued 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. 110 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 21 Pension and Other Post-Retirement Benefits Continued Financial Information Movements in the pension and other post-retirement benefit assets (liabilities) were as follows: recognized in earnings 28 (80) (52) (143) Balance – beginning of year 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 1 Foreign exchange rate changes and other Subtotal of components of defined benefit expense (recovery) 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 Gain 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 2 Balance comprised of: Non-current assets Other assets (Note 16) Current liabilities Payables and accrued charges (Note 20) Non-current liabilities Pension and other post-retirement benefit liabilities 2020 Plan Assets Obligation Net Obligation 2019 Plan Assets Net (2,044) 1,621 (423) (1,797) 1,416 (381) (36) (66) 133 (3) – 53 (132) (1) (36) (13) 1 (4) (40) (74) – (29) – 59 – 13 72 (40) (15) – (16) (71) – – (199) 14 193 193 5 21 (86) (60) 193 8 – 21 – 21 (153) 12 – (141) (5) – 96 91 – – (153) 12 230 230 230 89 5 26 (96) (65) – 26 – 26 (199) 14 – (185) (5) – 86 81 (2,066) 1,706 (360) (2,044) 1,621 (423) 109 (15) (454) 25 (15) (433) 1 During 2020, we transferred certain pension plan obligations to an insurance company. 2 Obligations arising from funded and unfunded pension plans are $(1,690) and $(376), respectively (2019 – $(1,652) and $(392)). Other post-retirement benefit plans have no plan assets and are unfunded. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 111 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 21 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: 2020 2019 Quoted Prices in Active Markets for Identical Assets Other 1 Total Quoted Prices in Active Markets for Identical Assets Cash and cash equivalents Equity securities and equity funds US International Debt securities 2 International balanced fund Other Total pension plan assets 9 19 158 – – – 186 33 879 – 571 – 37 42 898 158 571 – 37 1,520 1,706 8 1 35 – – – 44 Other 1 112 Total 120 571 62 698 112 22 572 97 698 112 22 1,577 1,621 1 Approximately 76 percent (2019 – 60 percent) of the Other plan assets are held in funds whose fair values are estimated using their net asset value per share. For the majority of these funds, the redemption frequency is immediate. The Plan Committee manages the asset allocation based upon our current liquidity and income needs. 2 Debt securities included US securities of 60 percent (2019 – 82 percent) and International securities of 40 percent (2019 – 18 percent). We use letters of credit or surety bonds to secure certain Canadian unfunded defined benefit plan liabilities as at December 31, 2020. We expect to contribute approximately $125 to all pension and post-retirement plans in 2021. Total contributions recognized as expense under all defined contribution plans for 2020 was $116 (2019 – $88). 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: 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 3 (years) 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) Pension Other 2020 2019 2020 2019 2.83 4.57 n/a n/a 20.6 22.8 15.4 3.35 4.66 n/a n/a 20.5 22.7 14.6 2.66 n/a 4.50 – 5.80 2 2037 3.20 n/a 4.50 – 6.10 2 2037 20.2 22.8 15.2 20.3 22.9 15.8 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 5.80 percent in 2020, moving to 4.50 percent by 2037 (2019 – 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. 112 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 21 Pension and Other Post-Retirement Benefits Continued 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 2020 2019 Benefit Obligations Expense in Earnings Before Income Taxes Benefit Obligations Expense in Earnings Before Income Taxes 2,066 360 (280) 52 10 (10) 2,044 340 (270) 71 10 (10) NOTE 22 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. 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, 2020, were as follows: Asset retirement obligations Retail Potash Phosphate Corporate and other 4, 5 Accrued environmental costs Retail Corporate and other Cash Flow Payments (years) 1 Discounted Cash Flows 2,3 1 – 30 33 – 441 1 – 80 1 – 482 1 – 30 1 – 20 25 76 468 640 89 461 Discount Rate +0.5% -0.5% (70) 90 (10) 5 1 Time frame in which payments are expected to principally occur from December 31, 2020. Adjustments to the years can result from changes to the mine life and/or changes in the rate of tailing volumes. 2 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. Risk-free rates range from 1.2 percent to 6.5 percent. 3 Total undiscounted cash flows are $2.8 billion. For the Potash segment, this 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 407 years. 4 For nitrogen sites, we have not recorded any asset retirement obligations as 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 55 years. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 113 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 22 Asset Retirement Obligations and Accrued Environmental Costs Continued Following is a reconciliation of asset retirement obligations and accrued environmental costs: Asset Retirement Obligations Accrued Environmental Costs Balance – December 31, 2019 Acquisitions Disposals Change in estimates Recorded in earnings Settled during the year Foreign currency translation and other Balance – December 31, 2020 Balance – December 31, 2020 comprised of: Current liabilities Payables and accrued charges (Note 20) Non-current liabilities Asset retirement obligations and accrued environmental costs 1,254 12 – (9) 31 (88) 9 1,209 121 1,088 Total 1,798 27 (3) (7) 34 (109) 19 1,759 544 15 (3) 2 3 (21) 10 550 41 162 509 1,597 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 23 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, 2019 Issued under option plans and share-settled plans Repurchased Balance – December 31, 2020 Number of Common Shares 572,942,809 150,177 (3,832,580) 569,260,406 Share Capital 15,771 7 (105) 15,673 114 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 23 Share Capital Continued Share Repurchase Programs 2019 Normal Course Issuer Bid 1 2020 Normal Course Issuer Bid 2 Commencement Date Expiry Maximum Shares for Repurchase February 27, 2019 February 27, 2020 February 26, 2020 February 26, 2021 42,164,420 28,572,458 1 The 2019 normal course issuer bid permitted the repurchase of up to 7 percent of our outstanding common shares for cancellation. As of the expiry date, we had repurchased 33,256,668 of the maximum shares for repurchase. 2 The 2020 normal course issuer bid permits the repurchase of up to 5 percent of our outstanding common shares for cancellation and can expire earlier than the date above if we acquire the maximum number of common shares allowable or otherwise decide not to make any further repurchases. As at February 18, 2021, we had repurchased 710,100 of the maximum shares for repurchase. On February 17, 2021, our Board of Directors approved a share repurchase program of up to a maximum of 28,468,448 or 5 percent of our outstanding common shares for cancellation. Subject to acceptance by the Toronto Stock Exchange, the 2021 share repurchase program will commence on March 1, 2021, and will expire on the earlier of February 28, 2022, the date on which we have acquired the maximum number of common shares allowable or the date we determine 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: Number of common shares repurchased for cancellation Average price per share (US dollars) Total cost Dividends Declared Dividends declared for the years ended December 31 were as follows: 2020 2019 3,832,580 41.96 160 36,067,323 52.07 1,878 Declared February 19, 2020 May 6, 2020 August 10, 2020 December 10, 2020 2020 Per Share 0.45 0.45 0.45 0.45 1.80 Declared May 10, 2019 July 30, 2019 December 13, 2019 2019 Per Share 0.43 0.45 0.45 1.33 Subsequent to year-end, our Board of Directors declared a quarterly dividend of $0.46 per share payable on April 15, 2021, to shareholders of record on March 31, 2021. The total estimated dividend to be paid is $262. NOTE 24 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. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 115 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 24 Capital Management Continued We include total debt, adjusted total debt, adjusted net debt and adjusted shareholders’ equity as components of our capital structure. 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. We monitor the following ratios: Adjusted net debt to adjusted EBITDA Debt to capital 1 (Limit: 0.65:1.00) Adjusted EBITDA to adjusted finance costs 1 Calculated as adjusted total debt to adjusted capital. 2020 2019 2.6 0.34:1.00 7.4 2.5 0.33:1:00 8.0 Adjusted EBITDA is calculated in Note 3, while the calculation of the remaining components included in the above ratios are set out in the following tables: Short-term debt Current portion of long-term debt Current portion of lease liabilities Long-term debt Lease liabilities Total debt Letters of credit – financial Adjusted total debt Total debt Cash and cash equivalents Unamortized fair value adjustments Adjusted net debt Total shareholders’ equity Accumulated other comprehensive loss Adjusted shareholders’ equity Adjusted total debt Adjusted capital 2020 159 14 249 10,047 891 11,360 150 11,510 2020 11,360 (1,454) (404) 9,502 2020 22,365 119 22,484 11,510 33,994 2019 976 502 214 8,553 859 11,104 158 11,262 2019 11,104 (671) (424) 10,009 2019 22,869 251 23,120 11,262 34,382 116 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 24 Capital Management Continued 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 2020 520 (33) 20 (13) 494 2019 554 (54) 18 (15) 503 In 2020, we filed a universal base shelf prospectus in Canada and the US qualifying the issuance of up to $5.0 billion of common shares, debt securities and other securities during a period of 25 months from March 16, 2020. In 2020, we filed a prospectus supplement to issue $1,500 of notes, as discussed in Note 18. NOTE 25 Business Combinations The Company’s business combinations include the acquisition of Retail businesses, including Ruralco Holdings Limited (“Ruralco”), and various digital agriculture, proprietary products and agricultural services. Acquisition date September 30, 2019 $330 Purchase price, net of cash and cash equivalents acquired Ruralco Other Acquisitions Various 2020 – $233 On the acquisition date, we acquired 100% of the Ruralco stock that was issued and outstanding. (2019 – $581, net of $100 previously held equity- accounted interest in Agrichem) Transaction costs are recorded in acquisition and integration related costs in other expenses. Goodwill and expected benefits of the acquisition $236 The expected benefits of the acquisitions resulting in goodwill include: $133 (2019 – $341) (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 Description An agriservices business in Australia with approximately 250 operating locations. 2020 – 43 Retail locations including Tec Agro Group, a leading agriculture retailer in Brazil (2019 – 68 Retail locations including Actagro, LLC, a developer, manufacturer and marketer of environmentally sustainable soil and plant health products and technologies) In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 117 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 25 Business Combinations Continued We allocated the following values to the acquired assets and assumed liabilities based upon fair values at their respective acquisition date: 2020 Ruralco 2019 Preliminary 1 Adjustments Final Fair Value 2 Other Acquisitions 3 Other Acquisitions 3 Receivables Inventories Prepaid expenses and other current assets Property, plant and equipment Goodwill Other intangible assets Other non-current assets Total assets Short-term debt Payables and accrued charges Lease liabilities, including current portion Other non-current liabilities Total liabilities Total consideration Previously held equity-accounted interest in Agrichem Total consideration, net of cash and cash equivalents acquired 289 117 8 136 202 165 31 948 112 345 110 51 618 330 – 330 27 (5) (1) 4 34 43 (14) 88 55 (21) – 54 88 – – – 3164 112 7 140 236 208 17 1,036 167 324 110 105 706 330 – 330 68 63 4 73 133 47 2 390 36 108 2 11 157 233 – 233 68 145 38 115 341 179 2 888 25 156 1 25 207 681 100 581 1 Preliminary value as previously reported in our 2019 annual consolidated financial statements. 2 We have completed our assessment of identifying and measuring all the assets acquired and liabilities assumed. This assessment included a thorough review of all internal and external sources of information available on circumstances that existed at the acquisition date. We engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed. Adjustments recorded to the preliminary fair value primarily related to changes in the preliminary valuation assumptions, including refinement of our intangible assets and liabilities. All measurement 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 $260, of which $7 are considered to be uncollectible. 118 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 25 Business Combinations Continued Other Acquisitions Valuation Technique and Judgments Applied Assets Property, plant and equipment Ruralco X Other intangible assets X X X Other provisions and contingent liabilities X X 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. 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. Financial Information Related to the Acquired Operations 2020 Proforma 1 Sales EBIT Other Acquisitions 350 26 1 Estimated annual sales and earnings before finance costs and income taxes (“EBIT”) if acquisitions occurred at the beginning of the year. From date of acquisition Sales EBIT NOTE 26 Commitments 2020 Actuals 2019 Actuals Other Acquisitions Ruralco Other Acquisitions 190 12 249 (2) 312 (1) 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. At December 31, 2020, minimum future commitments under our contractual arrangements were as follows: Within 1 year 1 to 3 years 3 to 5 years Over 5 years Total Lease Liabilities 1 Long-Term Debt 1 Purchase Commitments Capital Commitments Other Commitments 281 408 233 383 1,305 434 2,378 2,498 10,485 15,795 1,268 757 72 142 2,239 87 16 6 1 110 132 118 53 127 430 Total 2,202 3,677 2,862 11,138 19,879 1 Includes principal portion and estimated interest. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 119 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 26 Commitments Continued Purchase Commitments We have a long-term natural gas purchase agreement in Trinidad that expires on 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 that 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. 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 contracts, the latest of which expires in 2026, and mineral lease commitments, the latest of which expires in 2038. NOTE 27 Guarantees 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 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, 2020, no amounts have been accrued in the consolidated financial statements (except for accruals relating to certain underlying liabilities). We directly guarantee our share of certain commitments of Canpotex (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. 120 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 28 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. Sale of Goods We sell potash outside Canada and the US exclusively through Canpotex. Canpotex sells potash to buyers in export markets pursuant to term and spot contracts at agreed upon prices. Our revenue is recognized at the amount received from Canpotex representing proceeds from their sale of potash, less net costs of Canpotex. Sales to Canpotex are shown in Note 3. The receivable outstanding from Canpotex is shown in Note 11 and arose from sale transactions described above. It is unsecured and bears no interest. There are no provisions held against this receivable. Key Management Personnel Compensation and Transactions with Post-Employment Benefit Plans Compensation to key management personnel was comprised of: Salaries and other short-term benefits Share-based compensation Post-employment benefits Termination benefits 2020 2019 16 26 2 – 44 15 31 3 12 61 Disclosures related to our post-employment benefit plans, and associates and joint ventures, are shown in Note 21 and Note 15, respectively. NOTE 29 Contingencies and Other Matters 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 Supporting Information (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. 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, 2020, we are not aware of any operating losses or other liabilities. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 121 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 29 Contingencies and Other Matters Continued Mining Risk The risk of underground water inflows and other underground risks is insured on a limited basis, subject to insurance market availability. Through December 31, 2020, we are not aware of any material losses or other liabilities that we have not accrued for. Environmental Remediation, 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 22. We have established provisions for environmental site assessment and/or remediation matters to the extent that we consider expenses associated with those matters 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: (cid:129) The United States Environmental Protection Agency (“US 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 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. (cid:129) We operate in countries that are parties to the Paris 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. 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. 122 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 30 Accounting Policies, Estimates and Judgments The following discusses the significant accounting policies, estimates, judgments and assumptions that we have adopted and applied 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. Basis of Consolidation These consolidated financial statements include the accounts of the Company and entities we control. (cid:129) Subsidiaries are fully consolidated from the date on which control is transferred to the Company until the date on which control ceases. They are deconsolidated from the date that control ceases. (cid:129) Intercompany balances and transactions are eliminated on consolidation. Principal (wholly owned) Operating Subsidiaries Location Principal Activity Potash Corporation of Saskatchewan Inc. Agrium Inc. Agrium Canada Partnership Agrium Potash Ltd. Agrium U.S. Inc. Cominco Fertilizer Partnership Loveland Products Inc. Nutrien Ag Solutions (Canada) Inc. Nutrien Ag Solutions, Inc. Nutrien Ag Solutions Limited PCS Nitrogen Fertilizer, LP PCS Nitrogen Trinidad Limited PCS Phosphate Company, Inc. Phosphate Holding Company, Inc. Canada Canada Canada Canada US US US Canada US Australia US Trinidad US US Mining and/or processing of crop nutrients and corporate functions Manufacturer and distributor of crop nutrients and corporate functions Manufacturer and distributor of crop nutrients Crop input retailer Production of nitrogen products in the US 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 US Combined Rural Traders Pty Limited Australia Crop input retailer Foreign Currency Transactions 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”). 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. 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 (income) expenses, as applicable, in the period in which they arise. 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. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 123 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 30 Accounting Policies, Estimates and Judgments Continued Restructuring Charges 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 a detailed formal plan for restructuring has been demonstrably committed to and a reliable estimate can be made. Revenue We recognize revenue when we transfer control over a good or service to a customer. Transfer of Control for Sale of Goods Transfer of Control for Sale of Services At the point in time when the product is (cid:129) purchased at our Retail farm center (cid:129) delivered and accepted by customers at their premises or (cid:129) loaded for shipping Judgment is used to determine whether we are acting as principal or agent by evaluating who: (cid:129) has the primary responsibility for fulfilling the promised good; (cid:129) bears the inventory risk; and (cid:129) has discretion for establishing the price. For transactions in which we act as an agent rather than the principal, revenue is recognized net of any commissions earned. The related commissions are recognized as the sales occurred or as unconditional contracts are signed. 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. Our sales revenue relating to our Potash, Nitrogen and Phosphate segments is generally 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). 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. Over time as the promised service is rendered For Retail, we do not provide general warranties; however, our customer contracts may provide certain product quality specification guarantees. 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. Transportation costs are generally recovered from the customer through sales pricing. 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. 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 generally less than 12 months, we apply the practical expedient as provided in IFRS 15, “Revenue from Contracts with Customers,” and do not adjust the promised amount of consideration for the effects of financing. Intersegment sales are made under terms that approximate market value. Seasonality in our business results from increased demand for products during planting season. Crop input sales are generally higher 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 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. 124 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 30 Accounting Policies, Estimates and Judgments Continued Share-based Compensation 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 For plans settled through cash (cid:129) fair value for stock options is determined on grant date using (cid:129) a liability is recorded based on the fair value of the awards the Black-Scholes-Merton option-pricing model, and each period. (cid:129) fair value for PSUs is determined on grant date by projecting the outcome of performance conditions. Estimation involves determining: (cid:129) stock option-pricing model assumptions as described in the weighted average assumptions table in Note 5; (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 return, Income Taxes 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. Taxation on earnings (loss) is comprised of current and deferred income tax and requires significant judgment and estimation. Taxation is recognized in the statements of earnings unless it relates to items recognized either in OCI or directly in shareholders’ equity. Current income tax Deferred income tax (cid:129) is the expected tax payable on the taxable earnings for the (cid:129) is recognized using the liability method year (cid:129) is calculated using rates enacted or substantively enacted at the dates of the consolidated balance sheets in the countries where our subsidiaries and equity-accounted investees operate and generate taxable earnings (cid:129) includes any adjustments made to income tax payable or recoverable in respect of previous years (cid:129) is based on temporary differences between carrying amounts of assets and liabilities and their respective income tax bases (cid:129) is 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 Current and deferred income tax assets and liabilities are offset only if certain criteria are met. The realized and unrealized excess tax benefits from share-based compensation arrangements are recognized in contributed surplus as current and deferred tax, respectively. 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). 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. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 125 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 30 Accounting Policies, Estimates and Judgments Continued Deferred income tax is not accounted for Deferred tax assets are (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. (cid:129) recognized to the extent it is probable 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. (cid:129) 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. Financial Instruments Financial assets are measured at amortized cost 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 and is not designated as fair value through profit or loss (“FVTPL”). Financial instruments are classified and measured as follows: 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. Fair Value Classification Instrument type Fair value gains and losses Interest and dividends Impairment of assets Foreign exchange Transaction costs FVTPL Cash and cash equivalents and derivatives Profit or loss Profit or loss — Profit or loss Profit or loss FVTOCI Equity investments not held for trading OCI Profit or loss — OCI OCI Amortized Cost Receivables, short-term debt, payables and accrued charges, long-term debt, lease liabilities, other long-term debt instruments — Profit or loss: effective interest rate Profit or loss Profit or loss Included in cost of instrument 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, interest rates 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 assess whether our derivatives 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. Potential sources of ineffectiveness are changes in timing of forecast transactions, changes in volume delivered, or changes in our credit risk or the counterparty. Measurement of ineffectiveness relating to our foreign exchange and interest rate hedges is based on a comparison of the cumulative changes in fair value of the hedging instrument and the cumulative change in the fair value of a hypothetical derivative with terms based on the hedged forecast cash flows. Potential sources of ineffectiveness are changes in timing or amounts of forecasted cash flows, embedded optionality, and changes in our credit risk or the credit risk of a counterparty. 126 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 30 Accounting Policies, Estimates and Judgments 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 Financial assets and financial liabilities are offset, and the net amount is presented in the consolidated balance sheets when we: similar to a cash flow hedge; and (cid:129) currently have a legally enforceable right to offset the (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. recognized amounts; and (cid:129) intend either to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. Fair Value Measurements 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. (cid:129) Level 3 – Prices or valuation techniques that require inputs that are both unobservable and significant to the overall measurement. 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. Fair value measurements are categorized into levels based on the degree to which inputs are observable and their significance: Fair value estimates: (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) 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. Cash and Cash Equivalents Highly liquid investments with a maturity of three months or less from the date of purchase are considered to be cash equivalents. Receivables 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. 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. 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. 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. Inventories Inventories are valued monthly at the lower of cost and net realizable value. Costs are allocated to inventory using the weighted average cost method. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 127 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 30 Accounting Policies, Estimates and Judgments Continued 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 business) less the estimated costs of completion and estimated costs to make the sale (cid:129) replacement cost A writedown is recognized if the carrying amount exceeds net realizable value and may be reversed if the circumstances that 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. Property, plant and equipment Measurement (cid:129) cost, which includes capitalized borrowing (cid:129) cost less accumulated depreciation and any Owned Right-of-use (leased) Depreciation method costs, less accumulated depreciation and any accumulated impairment losses (cid:129) cost of major inspections and overhauls is capitalized (cid:129) maintenance and repair expenditures that do not improve or extend productive life are expensed in the period incurred accumulated impairment losses (cid:129) lease payments are allocated between finance costs, and a reduction of the liability and discounted using the interest rate implicit in the lease, if available, or an incremental borrowing rate, 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 (cid:129) certain property, plant and equipment (cid:129) straight-line – over the shorter of the asset’s useful life and the lease term directly related to our Potash, Nitrogen and Phosphate segments – units-of-production – based on the shorter of estimates of reserves or service lives (cid:129) pre-stripping costs – units-of-production – over the ore mined from the mineable acreage stripped (cid:129) remaining assets – straight-line Estimated useful lives, expected patterns of consumption, depreciation method and residual values are reviewed at least annually. 128 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 30 Accounting Policies, Estimates and Judgments Continued Judgment/ practical expedients Owned Right-of-use (leased) Determining: We have chosen to: (cid:129) costs, including income or expenses derived from an asset under construction, that are eligible for capitalization; (cid:129) include the use of a single discount rate for a portfolio of leases with reasonably similar characteristics, (cid:129) exclude initial direct costs in measuring ROU assets at the date of initial application, (cid:129) not separate non-lease components and instead to account for lease and non-lease components as a single arrangement, and (cid:129) use exemptions for short-term and low value leases which allow payments to be expensed as incurred. 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. (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. 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. 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. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 129 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 30 Accounting Policies, Estimates and Judgments Continued Goodwill and Other intangible assets 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. Goodwill is allocated to a CGU or group 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 the CGU or group of CGUs expected to benefit from the business combination in which the goodwill arose. Other intangible assets are generally measured at cost less accumulated amortization and any accumulated impairment Impairment of long-lived assets 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 to be held and used (including property, plant and equipment, and investments), and our goodwill and other intangible assets. When such indicators exist, impairment testing is performed. Regardless, goodwill is tested at least annually (in the fourth quarter). We review at each reporting period for possible reversal of the impairment for non-financial assets, other than goodwill. Equity-Accounted Investments losses. We use judgment to determine which expenditures are eligible for capitalization as intangible assets. Costs incurred internally from researching and developing a product are expensed as incurred until technological feasibility is established, at which time, the costs are capitalized until the product is available for its intended use. Judgment is required in determining when technological feasibility of a product is established. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. At least annually, the useful lives are reviewed and adjusted if appropriate. Estimates and judgment involves: (cid:129) identifying the appropriate asset, group of assets 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 or a reversal of 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. 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. Pension and Other Post-Retirement Benefits 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 (a) when a plan amendment or curtailment occurs; or (b) 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. 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. 130 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 30 Accounting Policies, Estimates and Judgments Continued 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 (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. Asset Retirement Obligations and Accrued Environmental Costs Provisions are: (cid:129) decommissioning of underground and surface operating (cid:129) measured at the present value of the cash flows expected to facilities; be required to settle the obligation; and (cid:129) general cleanup activities aimed at returning the areas to an (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 amount that would be recognized if the liability becomes probable. Asset retirement obligations and accrued environmental costs include: (cid:129) reclamation and restoration costs at our potash and 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; Business Combinations (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. Foreign exchange hedge gains or losses which we designated a cash flow hedge are included in the consideration. (cid:129) Identifiable assets acquired and liabilities assumed are generally measured at fair value. environmentally acceptable condition; and (cid:129) post-closure care and maintenance. 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. (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) For each business combination, we elect to measure the non-controlling interest in the acquired entity either at fair value or at the proportionate share of the acquiree’s identifiable net assets. In millions of US dollars unless otherwise noted 2020 Nutrien Annual Report 131 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information NOTE 30 Accounting Policies, Estimates and Judgments Continued 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. 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. Transaction costs are recorded in acquisition and integration related costs in other (income) expenses. Standards, Amendments and Interpretations Effective and Applied The IASB and IFRS Interpretations Committee (“IFRIC”) have issued certain standards and amendments or interpretations to existing standards that were effective, and we have applied. (cid:129) Conceptual Framework for Financial Reporting (cid:129) Amendments to IAS 1 and IAS 8, Definition of Material We have adopted the following amended standards and interpretations with no material impact on our consolidated financial statements: (cid:129) Amendments to IFRS 3, “Business Combinations”, Definition of a business (cid:129) Interest Rate Benchmark Reform – Phase 1 – Amendments to IFRS 9, IAS 39 and IFRS 7 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, 2020. The following amended standards and interpretations are being reviewed to determine the potential impact on our consolidated financial statements: (cid:129) Amendments to IAS 1, Classification of liabilities as current or non-current (cid:129) Amendment to IAS 16, “Property, plant and equipment” (cid:129) Amendment to IAS 37, Onerous contracts (cid:129) Annual improvements 2018 – 2020 (cid:129) Interest Rate Benchmark Reform – Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (cid:129) IFRS 17, “Insurance contracts” 132 Nutrien Annual Report 2020 In millions of US dollars unless otherwise noted Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information TERMS & DEFINITIONS Terms AECO Argus Bloomberg CDP Climate CRU ESG FTSE Russell ISS Quality Scores Moody’s MSCI ESG Rating NYMEX NYSE S&P/S&P Global CSA Sustainalytics ESG Risk TSX USDA CAD USD AUD Scientific Terms Potash Nitrogen Phosphate Product Measures K2O tonne N tonne P2O5 tonne Product tonne Alberta Energy Company, Canada Argus Media group, UK Bloomberg Finance L.P., USA CDP Worldwide, England CRU International limited, UK Environmental, social and governance FTSE International Limited, England Institutional Shareholder Services Inc., USA Moody’s Corporation (NYSE: MCO), USA MSCI Inc., USA New York Mercantile Exchange, USA New York Stock Exchange, USA S&P Global Inc., USA Sustainalytics, a Morningstar, Inc. company, Netherlands Toronto Stock Exchange, Canada United States Department of Agriculture, USA Canadian dollar United States dollar Australian dollar KCI NH3 UAN CO2e 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) carbon dioxide equivalent 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) 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 Standard measure of the weights of all types of potash, nitrogen and phosphate products 2020 Nutrien Annual Report 133 Overview Management’s Discussion & Analysis Three-Year Highlights Financial Statements Other Information Definitions Blue/low carbon ammonia Brownfield Capital deployment Community investment Compound Annual Growth Rate Environmental Incidents Total Employee Turnover Rate Greenfield capacity Latin America Lost-Time Injury Frequency Merger Mmt North America Offshore Taxes and royalties Total Recordable Injury Frequency Total Shareholder Return Voluntary Employee Turnover Ammonia produced primarily utilizing carbon capture utilization & storage (“CCUS”) or other low-emission production technologies to significantly reduce the carbon intensity of resultant production. 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 voluntary and involuntary terminations, including retirements and deaths, as a percentage of average permanent employees for the year. New operation built on an undeveloped site. South America, Central America, Caribbean and Mexico. 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. Million metric tonnes Canada and the US. All markets except Canada and the US. 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 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. 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. The number of permanent employees who left the Company due to voluntary terminations as a percentage of average permanent employees for the year. Includes voluntary retirements and resignations. Working capital ratio Current assets divided by current liabilities. 134 Nutrien Annual Report 2020 Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information BOARD OF DIRECTORS Mayo Schmidt Christopher Burley Maura Clark Russell Girling Miranda Hubbs Alice Laberge Consuelo Madere Charles (Chuck) Magro Keith Martell Aaron Regent Nelson Luiz Costa Silva SENIOR MANAGEMENT Charles (Chuck) Magro President and Chief Executive Officer Pedro Farah Executive Vice President and Chief Financial Officer Michael J. Frank Executive Vice President and CEO of Retail Ken Seitz Executive Vice President and CEO of Potash Raef Sully Executive Vice President and CEO of Nitrogen and Phosphate Noralee Bradley Executive Vice President and Chief Legal Officer Mark Thompson Executive Vice President and Chief Corporate Development and Strategy Officer Brent Poohkay Executive Vice President and Chief Information Officer Michael Webb Executive Vice President and Chief Human Resources and Administrative Officer 135 Nutrien Annual Report2020Overview Managementʼs Discussion & Analysis Three-Year Highlights Financial Statements Other Information SHAREHOLDER INFORMATION DIVIDENDS Dividend amounts paid to shareholders resident 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, Computershare Investor Services Inc. OWNERSHIP On February 18, 2021, there were 583 holders of record of the Company’s common shares. COMMON SHARE PRICES 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. It also has corporate offices at: 13131 Lake Fraser Drive SE Calgary, Alberta Canada T2J 7E8 5296 Harvest Lake Drive Loveland, Colorado US 80538 OFFICES Nutrien’s registered head office is: Suite 500, 122 – 1st Avenue South Saskatoon, Saskatchewan Canada S7K 7G3 Investor Relations Investor Relations Department Email investors@nutrien.com Phone (403) 225-7451 NYSE CORPORATE GOVERNANCE The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to our 2020 Annual Report on Form 40-F. TRANSFER AGENT You can contact Computershare Investor Services Inc., the Company’s transfer agent, as follows: Phone 1-800-564-6253 (toll-free within Canada and the US) 1-514-982-7555 (from any country other than Canada and the US) By Fax 1-888-453-0330 (all countries) By Mail Computershare 100 University Ave, 8th Floor, North Tower Toronto, ON M5J 2Y1 Internet Access your registered account on the Investor Centre website: www.investorcentre.com 136 Nutrien Annual Report2020 Nutrien.com Facebook.com/Nutrienltd Twitter.com/Nutrienltd

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