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Agrium's (AGU) Q3 Earnings Outshine Estimates, Sales Trail

Agrium Inc.AGU posted net earnings of $99 million or 72 cents per share in the third quarter of 2015, up 8.8% from $91 million or 63 cents per share recorded a year ago. The bottom line was supported by higher volumes of Wholesale nutrients and lower production costs at the company's Wholesale business unit.

Barring one-time items other than stock-based payment recovery (post-tax) of $11 million or 8 cents per share, Agrium's adjusted earnings came in at 79 cents per share, topping the Zacks Consensus Estimate of 70 cents.

Agrium, Inc. (AGU) - Earnings Surprise | FindTheCompany

Revenues decreased 13.6% year over year to $2,524 million in the reported quarter. The fall was due to a sales decline in both the Retail and Wholesale businesses of the company. Sales also missed the Zacks Consensus Estimate of $2,893 million.

Agrium's shares rose 0.9% to close at $96.29 on Nov 5.

Segment Highlights

Revenues from the Retail segment fell 12.4% year over year to $2.01 billion. Gross profit declined 8.9% year over year to $494 million. The Retail segment's EBITDA was $129 million, down 0.8% year over year. Results were hurt by reduced crop input prices, weaker non-U.S. currency exchange rates and dry weather conditions which impacted the company's international and Canadian operations.

Within the Retail business, crop nutrient sales declined nearly 10% year over year to $582 million, primarily due to the combined effect of lower average crop nutrient selling prices and lower sales volumes. The segment witnessed a 4% decrease in sales volumes of nutrients. Crop protection sales went down 8% to $1,040 million as dry conditions adversely affected sales at Agrium's Canada operations as well as international crop protection. Sales were also negatively affected by lower demand for insecticides in the U.S. and lower prices for glyphosate products.

Sales from the Wholesale segment came in at $673 million, down roughly 16% year over year, impacted by the sale of non-core, low-return assets. Gross profit surged around 71% year over year to $218 million in the reported quarter. Adjusted EBITDA soared roughly 32% year over year to $226 million, driven by higher production volumes and reduced cost of production.

Within the Wholesale business, nitrogen gross profit surged 69% year over year to $130 million, attributable to higher sales volumes and significantly lower cost of products sold due to improved capacity utilization rates and lower natural gas costs. Sales volumes increased roughly 3% year over year to 760,000 tons owing to stronger urea and ammonia sales. Potash sales volumes soared 53% year over year to 384,000 tons in the reported quarter. Phosphate sales volumes also grew 3% to 269,000 tons.

Financials and Shareholder Returns

Agrium ended the quarter with cash and cash equivalents of $753 million, up roughly three-fold year over year. Long-term debt increased around 47% year over year to $4,517 million. Cash used in operations went down around 52% year over year to $226 million in the quarter.

Agrium repurchased 5.6 million shares since April under its present authorization plan.

Outlook

Agrium, which is among the prominent fertilizer companies, along with Mosaic MOS , Potash Corp. POT and CF Industries CF , revised its annual guidance for 2015. The company now anticipates earnings per share for 2015 in the range of $7.10-$7.40 compared with $7.00-$7.50 expected earlier. The revision was done taking into consideration the risk and opportunity associated with weather conditions and the length of fall season.

Agrium now expects its Retail EBITDA to lie in a range of $1-$1.03 billion, against its earlier projection of $1-$1.05 billion, incorporating the impact of drought and lower crop prices on its Canadian operations in 2015.

Agrium reaffirmed its projections for annual nitrogen production. However, it lowered its potash production guidance to 1.95−2.05 million tons for 2015, compared to its previous forecast of 1.9−2.2 million tons.

Agrium currently carries a Zacks Rank #3 (Hold).

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POTASH SASK (POT): Free Stock Analysis Report

CF INDUS HLDGS (CF): Free Stock Analysis Report

AGRIUM INC (AGU): Free Stock Analysis Report

MOSAIC CO/THE (MOS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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