Nutrien’s new CEO Ken Seitz has a lot on his plate
In some ways, Ken Seitz, the new chief executive of fertilizer giant Nutrien Ltd., NTR-T -2.12%decrease is in an enviable position.
As long as he doesn’t get fired, he’ll be ahead of his two predecessors, Mayo Schmidt and Chuck Magro, both of whom were shown the door in the past year and a half. And as a former miner himself, Mr. Seitz commands a natural respect from the thousands of men and women who work a kilometre underground in Nutrien’s six potash mines in Saskatchewan, some of which have been in operation since the late 1960s.
On top of all that, potash, the potassium-rich fertilizer ingredient that is the Saskatoon-based company’s most important commodity, is in a bull market the likes of which the industry has not seen since the heady days of the mid-2000s.
Nutrien taps Ken Seitz as permanent CEO as it looks to move past executive turmoil
But there is still plenty to fret about for the former farm boy, who grew up just outside Regina. Nutrien, once seen as the ultimate steady-as-she-goes, borderline-boring stalwart of the mining industry, has the spotlight firmly pinned on it. After the turmoil that surrounded the exits of the company’s former CEOs, Mr. Seitz needs to prove he has the mettle to get the company back on track.
Mr. Magro, Nutrien’s CEO since the company was formed out of a merger of PotashCorp of Saskatchewan and Agrium Inc. in 2018, was terminated in April of last year. That was becausethe board opposed his plans to partner on Australian megaminer BHP Group Ltd.’s potash project in Jansen, Sask.
Mr. Schmidt, who was chairman of the board during the clash with Mr. Magro, was elevated to CEO only to be turfed after eight months, mainly because of his brusque leadership style, which caused tension both within Nutrien and externally with investors.
After Mr. Schmidt’s dismissal in January, Mr. Seitz was named interim CEO, and he was made permanent in August. In an interview at the company’s Cory potash mine just outside of Saskatoon last week, he would not say much of anything about the messy exits of his predecessors. He offered only a hint of what it felt like to step into the morass.
“For my part, it was really about blocking out all the noise, and staying focused,” he said.
There is much for Mr. Seitz to focus on.
Nutrien is keen to insert itself into any conversation about global food security. The world’s population is about 7.5 billion, and by some estimates it is expected to grow to 10 billion by 2050. Nobody is quite sure how all those new humans will be fed.
A common saying among Nutrien employees these days is “we’re feeding the world.” The line is a bit of a stretch; it’s mainly farmers and food companies who feed the world. But fertilizer miners, fertilizer retailers, seed producers and seed retailers (Nutrien does all of those things) are parts of the equation.
This year, Russia, the second largest global producer of potash after Canada, slashed production and exports of the commodity because of international sanctions placed on Moscow following its invasion of Ukraine. Belarus, the third largest producer, was already subject to sanctions before the war began. Shipments of potash out of the two countries fell by 25 and 50 per cent, respectively, in the first half of the year.
This caused the prices of some potash contracts to surge to record levels. But the spike was followed by a pullback, because some farmers reduced consumption as a result of the high prices, and because Russia and Belarus found ways to work around the sanctions.
Mr. Seitz has been tracking the fertilizer industry for decades. He was formerly head of potash at Nutrien. Before that, he was head of Canpotex Ltd., which markets and distributes potash internationally.
He remembers the craziness of the 2000s, when potash raced to an all-time high based on speculative hype. And he remembers the collapse that followed after the bubble burst. That was an intense time, but the market this year is something else entirely.
“It’s unlike anything that came before,” Mr. Seitz said.
Nutrien is betting the bull market will persist. In June, the company announced it would boost its potash production by 15 per cent over the next three years.
That ramp-up will not be cheap. The company estimates it will cost about $600-million. While Mr. Seitz said Nutrien has wiggle room to pull back on its planned production increases, there’s still risk associated with the move.
The company will be on the hook for certain costs regardless of demand, because it has already ordered new supplies and equipment. Individual pieces of mining equipment, such as the monster machines that cut soft potash rock from the faces of mines, can cost tens of millions of dollars.
Mr. Seitz said the “regret risks” of pushing too aggressively on production are relatively limited, because Nutrien isn’t building any new mines, which would come with gargantuan one-time fixed costs.
He wasn’t shy about pointing out the risks associated with building new mines in this high-inflation environment – in part because that’s what Nutrien’s now-rival, BHP, is doing. After failing to reach an agreement with Nutrien during Mr. Magro’s time as CEO, BHP decided to build the Jansen mine on its own. It won’t be completed until 2026, and it will cost the company at least $7.5-billion.
Analysts had warned repeatedly that Jansen would be bad for the company, because it would flood the market with excess supply.
But now, with the global supply chain in a drastically different spot, Mr. Seitz sees the potential impact from the mine as less of a worry.
He pointed out that Jansenwould only be about the size of one average-sized Nutrien mine. And it is significantly smaller than Nutrien’s biggest operation, Rocanville.
Still, the industry is closely following BHP’s long-term intentions toward Nutrien. The Australian miner, at least on paper, is capable of swallowing its Canadian competitor whole.
While Nutrien is large for a Canadian company, with a market value of $62-billion, BHP is worth US$130-billion. In 2010, BHP tried to buy Nutrien’s predecessor company, PotashCorp, but the deal was rejected by the federal government. Tony Clement, who was industry minister at the time, ruled that the takeover would not provide a net economic benefit for Canada.
But Mr. Clement told Australia’s Financial Review last year that Ottawa’s decision-making process on foreign acquisitions has evolved in a way that could allow BHP to make a fresh move on Nutrien.
He said the federal government’s takeover approvals now revolve around national security, with particular scrutiny paid to any moves by Chinese state-owned companies. A BHP takeover of Nutrien would be more likely to be approved today because of that shift in priorities, according to Mr. Clement, and because Australia is a strong ally of Canada.
“But that would have been true in 2010 as well. So I’m not sure,” Mr. Seitz said. He added that he didn’t want to speculate on what Ottawa would do if BHP were to take another run at the company.
A bigger near-term priority and constant worry for Mr. Seitz is keeping workers safe as the company pushes to meet its higher production targets. Technology has mechanized jobs that used to put people in danger, but it’s impossible to eliminate risk entirely.
Late last month, an underground miner at the Cory mine was seriously injured and hospitalized. He had been doing reinforcement work in a section of the mine when a piece of rock gave way and hit him hard.
“We’re optimistic about a full recovery,” Mr. Seitz said. “We’re doing everything now to help him.”
He said Nutrien will learn from the accident and make improvements to its methods, as it has in the past. Ground fall accidents are rare at the company. This was the first one since 2014.
“We’re working in soft rock mines. These hazards definitely exist,” he said. “The amount of unknowns that you’re working with is extraordinary.”
