Agrium Inc.
's (
AGU
) second-quarter 2012 adjusted (excluding one-time items other than
stock-based compensation expenses) earnings of $5.43 per share
exceeded the Zacks Consensus Estimate of $5.36. On a reported
basis, earnings came in at $5.44 per share, up 19.8% from $4.54
reported in the year-ago quarter.
Revenues amounted to $6,834 million in the quarter, up 10.3%
year over year, and also above the Zacks Consensus Estimate of
$6,549 million. Revenues were driven by higher agricultural
sales.
Segmental Performance
Retail:
The segment posted sales of $5.2 billion in the quarter, reflecting
a year-over-year jump of 12%. Strong demand across all crop input
products and services led to the increase in sales. Gross profit
jumped 10.8% year over year to $1.1 billion. The segment's earnings
from continuing operations before finance costs, income taxes,
depreciation and amortization (EBITDA) were a record $605 million,
up 14.4% year over year.
Wholesale:
The wholesale segment posted net sales of $1.7 billion in the
quarter, marginally above the year-ago quarter. Gross profit was
the highest in company's history at $673 million, an increase of 9%
from the year-ago quarter. EBITDA increased 11.2% to $686 million.
The growth was driven by higher realized selling prices and lower
input costs of the nitrogen business.
Advanced Technologies:
Advanced Technologies' gross profit was $36 million, down 2.7% from
$37 million in the prior-year quarter. Unplanned outages at the
Carseland nitrogen facility resulted in lower sales volumes of the
Environmentally Smart Nitrogen (ESN). These also offset the strong
earnings posted by the Micronutrients and Evergro acquisitions and
increased sales in the Direct Solutions segment in the U.S. EBITDA
jumped 11.1% year over year to $20 million.
Acquisition
Agrium, in March 2012, entered into an agreement with Viterra
Inc. to acquire the majority of its Agri-products business. The
purchase price is expected to be roughly C$1.65 billion. Agrium
will acquire the assets from Glencore International plc upon
completion of the latter's acquisition of Viterra.
On August 2, 2012, Agrium and Glencore announced that
CF Industries Holdings Inc.
(
CF
), which owns a 66% interest in the Medicine Hat nitrogen facility,
will buy Viterra's 34% interest in the facility for C$915-million.
As such, Agrium will not acquire an interest in the Medicine Hat
facility. However, the company will continue to benefit from
Viterra's operating cash flow on the facility till the closure of
the transaction.
Financial Position
Cash provided by operating activities was $1,120 million in the
second quarter compared with $76 million at the end of the year-ago
quarter. Capital expenditure stood at $514 million versus $246
million in the prior-year quarter. Cash and cash equivalent as of
June 30, 2012, was $1,946 million compared with $1,346 million as
of December 31, 2011.
Outlook
The company expects crop yields to be lower in 2012 owing to the
severe droughts in the country, resulting in high grain prices.
High crop prices and tight grain inventories are expected to create
huge demand for nutrients in the years ahead.
We currently have a long-term Outperform recommendation on
Agrium. The company, which competes with
CF Industries Holdings Inc
. and
Potash Corp. of Saskatchewan Inc.
(
POT
), maintains a Zacks #1 Rank, implying a short-term (1 to 3 months)
Strong Buy rating
AGRIUM INC (AGU): Free Stock Analysis Report
CF INDUS HLDGS (CF): Free Stock Analysis Report
POTASH SASK (POT): Free Stock Analysis Report
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