Agrium Inc. (AGU)

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Agrium (AGU)

Q2 2013 Earnings Call

August 08, 2013 9:30 am ET


Richard Downey - Vice President of Investor/Corporate Relations

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

Charles Victor Magro - Chief Operating Officer and Executive Vice President

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

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

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


Ben Isaacson - Scotiabank Global Banking and Markets, Research Division

P. J. Juvekar - Citigroup Inc, Research Division

Adam Samuelson - Goldman Sachs Group Inc., Research Division

Jacob Bout - CIBC World Markets Inc., Research Division

Kevin W. McCarthy - BofA Merrill Lynch, Research Division

Michael Picken - Cleveland Research Company

Joel Jackson - BMO Capital Markets Canada

Sandy H. Klugman - Susquehanna Financial Group, LLLP, Research Division

John Chu - AltaCorp Capital Inc., Research Division

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

Matthew J. Korn - Barclays Capital, Research Division

Christopher S. Parkinson - Crédit Suisse AG, Research Division

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

Mark R. Gulley - BGC Partners, Inc., Research Division

Robert B. Winslow - National Bank Financial, Inc., Research Division



Good day, everyone, and welcome to Agrium's Second 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 2013 Second Quarter Conference Call. On the phone today to review and discuss our results is Agrium's leadership team, including Mr. Mike Wilson, President and CEO of Agrium; and Mr. Chuck Magro, our Chief Operating Officer.

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 forecasts and conclusions, 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, 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 good morning to everyone. Agrium's mission statement is providing ingredients for growth. Our strategy over the past 10 years has been to grow across the crop input value chain and continue to strengthen our competitive advantages in each of our products and services. This strategy has paid off for our shareholders and provided additional stability in times of uncertainty such that we are not dependent on one particular nutrient, input or region. And at the same time, we provide excellent exposure to the agricultural space.

The second quarter is our busiest quarter of the year as we strive to provide the time-critical crop nutrients and other inputs and services to our agricultural customers so they can optimize their yields and returns. In this regard, our second quarter results were our second highest quarterly earnings in our history and we achieved this despite less than ideal conditions for the spring season in a number of our key markets.

A reality of our business is that weather can have a significant impact on the timing and total sales volumes of crop inputs for a given region. This year's spring application season across the U.S. Corn Belt was compressed compared to both last year's record early start and wide open season, as well as compared to what would be considered a more typical spring season. As of May, mid-May that is, U.S. corn growers were almost 60% behind last year's seeding phase and almost 40% behind the 5-year average. This had a proportionally greater impact on our Retail business results than those of our Wholesale business for the first half. Our geographic and product diversity helped offset this with excellent demand from Western Canada, where the timing of the spring application season was closer to normal.

We continue to be active in our share buyback program. As of July 31, we've purchased approximately 2 million shares at an average price of $88 per share for total consideration of $179 million. In fact, over the past year, we've returned or announced approximately $1.9 billion in capital distribution to our shareholders through share buybacks and dividends. Moving forward, we'll continue to grow the business, while weighing opportunities against additional incremental return of capital.

We closed on the Australia portion of the Viterra agricultural products transaction last month. The process and dialogue with the Competition Bureau on the Western Canadian assets is ongoing. Clearly, we would like to complete the acquisition of the Viterra Agri-products business as soon as possible and the Bureau is aware of this. This process does not lend itself to making firm forecasts on a completion date, but the process continues to move forward and we now expect to close this acquisition late in the third quarter. We're committed to communicating in further detail once the Competition Bureau review process is concluded, and we continue to believe that our acquisition of the Agri-products business will provide a significant benefit to farmers.

For a discussion on how our business results and the outlook, I'll now turn it over to Agrium's Chief Operating Officer, Chuck Magro.

Charles Victor Magro

Thanks, Mike. Starting with our Retail business. Retail achieved record results this quarter, driven primarily by a higher gross profit on crop nutrients and seed compared to the same quarter last year. However, our full earnings potential was impacted by the compressed spring season in the U.S. this year and somewhat lower year-over-year results from Landmark due to a severe downturn in the livestock sector, which impacted livestock-related sales and merchandise.

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