Agrium Inc. (AGU)

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Agrium (AGU)

Q4 2012 Earnings Call

February 22, 2013 9:31 am ET


Richard Downey - Vice President of Investor/Corporate Relations

Michael M. Wilson - Chief Executive Officer, President and Director

Ronald A. Wilkinson - Senior Vice President and President of Wholesale Business Unit

Richard L. Gearheard - Senior Vice President and President of Retail Business Unit

Thomas E. Warner - Vice President of Retail Distribution and President of Crop Production Services Inc

Susan Jones - Vice President of Marketing & Distribution

David J. Tretter - Executive Vice President of Procurement and Executive Vice President of wholesale sales of UAP Holding corp


Ben Isaacson - Scotiabank Global Banking and Markets, Research Division

Adam Schatzker - RBC Capital Markets, LLC, Research Division

Daniel Jester - Citigroup Inc, Research Division

Jacob Bout - CIBC World Markets Inc., Research Division

Joel Jackson - BMO Capital Markets Canada

Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division

Christopher S. Parkinson - Crédit Suisse AG, Research Division

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

Paul D'Amico - TD Securities Equity Research

Adam Samuelson - Goldman Sachs Group Inc., Research Division

Christopher Perrella

Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division

John Chu - AltaCorp Capital Inc., Research Division



Good day, everyone, and welcome to today's Agrium's Fourth Quarter Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the conference over to Mr. Richard Downey, Vice President, Investor, Corporate Relations. Please go ahead, sir.

Richard Downey

Thank you, operator. Good morning, everyone, and welcome to Agrium's 2012 Fourth Quarter Conference Call. On the phone today to review and discuss our results is Agrium's entire leadership team, including Mr. Mike Wilson, President and CEO of Agrium.

As we conduct this conference call, various statements that we make about future expectations, plans and prospects contain forward-looking information. Certain material assumptions were applied in making these conclusions and forecasts. Therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions are contained in our current quarterly report to our shareholders, as well as the most recent Annual Report, the MD&A and Annual Information Form filed with Canadian and U.S. securities commissions, to which we direct you.

I will now turn the call over to Mr. Mike Wilson.

Michael M. Wilson

Thank you, Richard, and welcome to everyone joining us today to review Agrium's fourth quarter results and our outlook for 2013.

Before discussing our results, I'd like to make a brief comment on JANA. I noticed on February 20, they put out another release. We obviously are not in agreement with their flawed arguments. We'll give our response in due course. What I'd like to do is to restrict questions today on this call to our quarterly results and outlook.

Although I can't help myself from commenting that in JANA's first paragraph of their most recent release, they highlight how much our stock has fallen as a result of appointing 2 new directors. They're right. At the end of the day on the 20th, our stock was down 5% since our new directors were announced. It just so happens that of our 4 competitors, 2 of them are down 4%, one's down 8.2% and one's down 14.3%. I'm surprised that JANA didn't comment on the negative effect that these appointments of our directors had on our competitors.

Anyhow, let me get into the business here. I'd like to briefly take a moment to highlight the appointment of our 2 new directors by Agrium's board early last week, Mayo Schmidt and David Everitt. The appointment of Mayo and David brings 2 very strong, uniquely qualified and independent directors to the board. These individuals have proven track records in the agricultural retail distribution space, as well as an excellent understanding of our markets, products, processes and, most importantly, our end customer, the grower. They also bring with them a necessary independence and expertise to complement an impressive board that has consistently garnered external recognition for the oversight and governance that they provide.

Agrium's board has been integral in overseeing and guiding the development and execution of our integrated strategy over the past decade, which has continued to deliver excellent results and returns. The industry-specific and retail distribution experience that these 2 individuals possess will contribute valuable insight and global perspective to what is already an outstanding board.

The benefits of this strategy and our leading position across the crop input value chain were clearly demonstrated this quarter as we delivered net earnings of $2.34 per diluted share, the highest for a fourth quarter in company history. You will note that there were a few recoveries this quarter related to claims and share-based payments. Even if you backed out these items, net earnings would've been $2.16 per diluted share.

These outstanding results were supported by our fourth quarter EBITDA in both Retail and AAT and were reflective of our ability to capture the strong demand from U.S. growers, driven by an extended fall application season and strong crop prices. We were again able to capitalize on our competitive strength in order to deliver very strong financial results, despite significantly lower ammonia sales in Western Canada this fall due to early snowfall pushing growers out of the field, and substantially weaker international potash demand in the fourth quarter relative to the same period last year.

Our performance this quarter capped off what was another excellent year for Agrium. We delivered record EBITDA of $2.7 billion this year, while net earnings from continuing operations reached $1.5 billion, which was in line with our record results achieved in 2011. We generated operating cash flow of $2.1 billion in 2012, the highest in company history.

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