) earnings for second-quarter 2014 topped expectations on record
results in its retail business, boosted by the acquisition of
Viterra Inc.'s retail operations across Canada and Australia. The
retail unit bounced back strongly after being hit by unusually cold
weather in North America in the first quarter.
Agrium posted profit from continuing operations of $625 million or
$4.34 per share in the reported quarter, an around 16% fall from
$744 million or $5.00 per share registered a year ago.
Agrium recorded charges of $22 million (or 11 cents per share)
related to environmental remediation activities in the quarter.
Barring that impact (and treating stock-based payments recovery as
a normal item), earnings from continuing operations came in at
$4.45 per share, outstripping the Zacks Consensus Estimate of
Revenues went up roughly 6% year over year to $7,338 million in the
reported quarter as a healthy gain in the retail business more than
offset sustained weakness in the wholesale franchise. Sales also
topped the Zacks Consensus Estimate of $7,071 million.
The Canada-based fertilizer maker's shares were up around 2% in
extended trading yesterday.
Revenues from the Retail segment moved up 15% year over year to a
record $6.4 billion in the reported quarter. Gross profit rose 18%
year over year to $1.3 billion. The results were driven by the
contributions from the acquisition of Viterra's agri-products
assets, better results in overseas operations and gains in the
North American business.
Within the retail business, crop nutrient sales rose 8% to $2.7
billion in the quarter on higher volumes from acquired businesses
and a rise in U.S. sales volumes. Crop protection revenues climbed
22% to $2.2 billion while seed sales shot up around 24% to $1
Retail segment's EBITDA jumped 28% year over year to a record $791
million with gains from Viterra assets buyout accounting for more
than half of the rise.
The Wholesale segment remains affected by weak pricing with sales
sliding 25% year over year to $1.2 billion. Gross profit tumbled
55% year over year to $227 million while EBITDA plummeting roughly
51% to $263 million. The results were hurt by lower pricing across
all crop nutrients and a decline in nitrogen sales volumes due to
Nitrogen sales volume dropped 18% year over year to 906,000 tons in
the quarter. Potash sales volume moved up 4% to 566,000 tons on
higher domestic demand. Phosphate sales volumes fell roughly 15% to
268,000 tons in the quarter.
Agrium exited the quarter with cash and cash equivalent of $759
million, a 53% year over year jump. Long-term debt remained
essentially flat year over year at $3,060 million. Cash flows from
operations were $37 million in the quarter versus cash used in
operations of $65 million a year ago.
Agrium noted that crop nutrient demand has been steady in the third
quarter so far in a weak pricing environment. Prospects for global
crop production have been driven by favorable growing conditions in
a number of key agriculture regions.
Global nitrogen market has also been stable as prices are supported
by Chinese urea costs and reduced availability out of Ukraine. The
company expects lower Chinese urea exports in the second half of
2014 compared with the same period a year ago at existing
international price levels.
Demand for potash in the second half will be backed by buyer
confidence in the market. However, uncertainty will remain in the
Indian phosphate market during the second half.
Agrium currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the fertilizer space are Potash Corp. (
), Chemical & Mining Co. of Chile Inc. (
) and Yara International ASA (
), all holding a Zacks Rank #2 (Buy).
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