Agrium Announces First Quarter Results

Marketwired

Tue, May 6, 2014, 6:12 PM

CALGARY, ALBERTA--(Marketwired - May 6, 2014) -

ALL AMOUNTS ARE STATED IN U.S.$

Agrium Inc. (AGU.TO) (AGU) announced today consolidated net earnings ("net earnings") from continuing operations of $12-million ($0.08 diluted earnings per share) for the first quarter of 2014, compared with net earnings from continuing operations of $146-million in the first quarter of 2013 ($0.98 diluted earnings per share).

The 2014 first quarter results included a $31-million ($0.15 diluted earnings per share) share-based payments expense offset by net hedging gains of $32-million ($0.16 diluted earnings per share) on natural gas hedge positions. Excluding these items, net earnings from continuing operations would have been at $11-million ($0.07 diluted earnings per share).¹

"Agrium's first quarter is traditionally our seasonally lowest earnings quarter and this was exacerbated this year by the record cold winter across North America. However, farmer sentiment is positive this spring and we are now seeing good demand for crop input products and services. Agrium achieved a record $788-million in operating cash flow this quarter, despite the lower net earnings, as we continue to focus on reducing working capital needs," commented Chuck Magro, Agrium's President and CEO.

Agrium is providing guidance for the second quarter of 2014 of $3.85 to $4.35 diluted earnings per share from continuing operations. This excludes derivative gains or losses and share-based payments expense in our estimated second quarter results.² The outage at our Carseland nitrogen plant is expected to impact second quarter earnings due to lost production and higher costs. The expected financial impact from the Carseland outage is estimated at $0.35 diluted earnings per share in the second quarter.²

(1) First quarter effective tax rate of 29 percent used for adjusted diluted earnings per share calculation.

(2) See disclosure in the section "Outlook, Key Risks and Uncertainties" in our 2014 first quarter Management's Discussion and Analysis and additional assumptions outlined on the following page.

MANAGEMENT'S DISCUSSION AND ANALYSIS

May 6, 2014

Unless otherwise noted, all financial information in this Management's Discussion and Analysis ("MD&A") is prepared using accounting policies in accordance with International Financial Reporting Standards ("IFRS") and is presented in accordance with International Accounting Standard 34 - Interim Financial Reporting. All comparisons of results for the first quarter of 2014 (three months ended March 31, 2014) are against results for the first quarter of 2013 (three months ended March 31, 2013). All dollar amounts refer to United States ("U.S.") dollars except where otherwise stated. The financial measures EBITDA and Adjusted EBITDA used in this MD&A are not prescribed by IFRS, or in the case of EBIT is an Additional IFRS financial measure. Such measures are defined in the "Additional IFRS and Non-IFRS Financial Measures" section of this MD&A.

The following interim MD&A is as of May 6, 2014 and should be read in conjunction with the Consolidated Interim Financial Statements for the three months ended March 31, 2014 (the "Consolidated Financial Statements"), and the annual MD&A and financial statements for the year ended December 31, 2013 included in our 2013 Annual Report to Shareholders to which readers are referred. The Board of Directors carries out its responsibility for review of this disclosure principally through its Audit Committee, comprised exclusively of independent directors. The Audit Committee reviews, and prior to publication, approves this disclosure, pursuant to the authority delegated to it by the Board of Directors. No update is provided to the disclosure in our annual MD&A where an item is not material or there has been no material change from the discussion in our annual MD&A. In respect of Forward-Looking Statements, please refer to the section entitled "Forward-Looking Statements" after the "Outlook, Key Risks and Uncertainties" section of this MD&A.

The major assumptions made in preparing our second quarter guidance are outlined below and include but are not limited to:

North American weather patterns will support condensed spring applications;
North America Wholesale fertilizer realized selling prices across all nutrients will be substantially lower than realized in the second quarter of 2013;
North America Wholesale produced nitrogen sales volumes will be approximately 15 percent lower than the sales volumes in the same quarter of 2013, largely due to the outage at the Carseland nitrogen facility that is expected to lower second quarter product availability by approximately 130,000 tonnes of urea and 30,000 tonnes of ammonia;
The average NYMEX gas price will not deviate significantly from approximately $4.50 per MMBtu;
North America Wholesale produced potash sales volumes will approximate the sales volumes realized in the second quarter of 2013 while phosphate sales volumes will be 10 to 15 percent lower than the sales volumes realized in the second quarter of 2013;
Retail North America crop nutrients margin percentages will be higher than the 19 percent realized in the second quarter of 2013;
Retail North America crop nutrients sales volumes will be approximately 25 percent higher than in the second quarter of 2013 due mainly to the Viterra acquisition;
Retail North America crop protection products margin percentages will approximate the 22 percent realized in the second quarter of 2013; and
Guidance is issued excluding the second quarter effects of:
- Share-based payments;
- Gains or losses on foreign exchange and derivative hedge positions; and
- Earnings or losses related to discontinued operations.

2014 First Quarter Operating Results

CONSOLIDATED NET EARNINGS

Agrium's 2014 first quarter net earnings from continuing operations were $12-million, or $0.08 diluted earnings per share from continuing operations, compared to net earnings from continuing operations of $146-million, or $0.98 diluted earnings per share from continuing operations, for the same quarter of 2013.

Financial Overview

	Three months ended March 31,
(millions of U.S. dollars, except per share amounts and where noted)	2014		2013		Change		% Change
Sales	3,079		3,156		(77	)	(2	)
Gross profit	556		705		(149	)	(21	)
Expenses	503		466		37		8
Earnings from continuing operations before finance costs and income taxes ("EBIT")	53		239		(186	)	(78	)
Net earnings from continuing operations	12		146		(134	)	(92	)
Net loss from discontinued operations	(9	)	(5	)	(4	)	80
Net earnings	3		141		(138	)	(98	)
Diluted earnings per share from continuing operations	0.08		0.98		(0.90	)	(92	)
Diluted loss per share from discontinued operations	(0.06	)	(0.04	)	(0.02	)	50
Diluted earnings per share	0.02		0.94		(0.92	)	(98	)
Effective tax rate (%)	29		27		N/A		N/A

Sales

Sales decreased by $77-million to $3.1-billion for the first quarter of 2014. Factors that affected our performance during the first quarter of 2014 compared to the first quarter of 2013 include the following:

Wholesale sales decreased by 11 percent to $1.1-billion due to lower prices across all product lines consistent with benchmark pricing, partially offset by higher sales volumes for urea, phosphate and potash; and
Retail sales increased by 4 percent to $2.2-billion largely due to the inclusion of results from Viterra Inc. ("Viterra") retail centers, which accounted for $266-million in sales during the current quarter, and an increase in crop nutrients sales volumes in Canada in the first quarter of 2014 following a shorter fall application season. This was partially offset by a decrease in crop protection sales primarily driven by unfavorable weather conditions throughout North America in the first quarter of 2014.

Gross Profit

Our gross profit for the first quarter of 2014 was $556-million, a decrease of $149-million compared to the first quarter of 2013. The main drivers of this variance consisted of the following:

Wholesale's gross profit decreased by $172-million for the first quarter of 2014, compared to the first quarter of 2013 primarily as a result of lower realized sales prices across all product lines consistent with benchmark pricing, which was partially offset by higher sales volumes from the carry forward of sales committed in the fourth quarter of 2013; and
Retail's gross profit increased by $11-million to $387-million for the first quarter of 2014, compared to the first quarter of 2013 due to the inclusion of results from Viterra, coupled with higher sales of livestock in Australia and the catch-up of crop nutrient sales volume in Canada in the first quarter of 2014 following a shorter fall application season. These were partially offset by lower crop protection sales due to unfavorable weather conditions throughout North America.

Expenses

Expenses increased by $37-million for the first quarter of 2014 compared to the first quarter of 2013. This difference is primarily a result of the following items:

An increase in Retail selling expenses primarily driven by increased costs of $50-million from the inclusion of Viterra results; and
An increase in general and administrative expenses due to a $15-million increase in share-based payments expense driven by an appreciation in share price in the first quarter of 2014.

The above increases in expenses were partially offset by a $24-million favorable change in commodity derivative gains. For further details, refer to the heading Wholesale in the section "Business Segment Performance".

Excluding Viterra, our Retail selling expenses would have been down $3-million, and our total expenses would have been $16-million lower.

The following table is a summary of our other expenses (income) for the first quarters of 2014 and 2013, respectively.

	Three months ended March 31,
(millions of U.S. dollars)	2014		2013

Realized and unrealized gain on commodity derivative financial instruments	(32	)	(8	)
Realized and unrealized gain on foreign exchange derivative financial instruments	(15	)	(13	)
Foreign exchange loss	12		19
Interest income	(11	)	(15	)
Environmental remediation and asset retirement obligations	(2	)	1
Bad debt expense	5		5
Potash profit and capital tax	3		4
Other	-		(4	)
	(40	)	(11	)

Effective Tax Rate

The effective tax rate on continuing operations was 29 percent for the first quarter compared to 27 percent for the same period last year due to a decrease in income earned in low tax jurisdictions.

BUSINESS SEGMENT PERFORMANCE

Retail

Retail's 2014 first quarter sales were $2.2-billion ($1.7-billion from North America), which is an increase of 4 percent compared to sales of $2.1-billion ($1.6-billion from North America) for the same period last year. Total gross profit was $387-million in the first quarter of 2014, compared to the $376-million achieved in the same period last year. The increase in sales and gross profit was primarily due to the contribution from the Viterra acquisition and improved results in Australia. Retail reported EBITDA of $17-million in the first quarter of 2014, compared to $25-million in the first quarter of last year. The decline was due to the increase in operating costs associated with the acquired Viterra operations and the delayed spring season impacting U.S. retail results this quarter. It is important to note that the first quarter is normally a negative earnings period for Canadian agri-retail business, with the majority of the earnings from this business achieved in the second and third quarters. International Retail was the major contributor to EBITDA this quarter, with $36-million reported in the first quarter of 2014, compared to $4-million in the same period last year.

Total crop nutrient sales were $896-million this quarter, compared to $802-million in the first quarter of 2013. The increase was due to additional sales from the acquired Viterra operations and stronger sales in the Australian market. This was partially offset by lower crop nutrient prices in North America compared to the same period last year. Gross profit for crop nutrients was $128-million this quarter, up slightly from the $121-million reported in the first quarter of 2013. Total crop nutrient margins as a percentage of sales were 14.3 percent in the first quarter of 2014, compared to 15.1 percent in the same period last year. The decrease is primarily due to a lower proportion of sales coming from the U.S., which typically has higher margins.

Crop protection sales were $730-million in the first quarter of 2014, compared to the $786-million in sales reported in the same period last year. The decrease in sales was due to unfavorable weather conditions in North America which delayed the start of the spring season. Total crop protection gross profit this quarter was $105-million, compared to $128-million reported in the first quarter of 2013. The decrease in gross profit was due to lower overall sales volumes and a change in geographic, product and customer mix due to the late season. As a result, total crop protection margins as a percentage of sales declined to 14.4 percent this quarter, compared to 16.3 percent in the same period last year.

Seed sales were $298-million in the first quarter of 2014, an increase from the $285-million earned in the first quarter last year. Gross profit was $46-million this quarter, up from $44-million earned in the first quarter of 2013. The increased sales and gross profit from seed can be primarily attributed to contributions from Viterra's canola seed business, while the delayed spring season in the U.S. pushed some higher margin seed sales into the second quarter. Total seed margins as a percentage of sales were 15.4 percent in the first quarter of 2014, in line with the same quarter last year.

Sales of merchandise in the first quarter of 2014 were $186-million, compared to $120-million in the same period last year. The large increase was due to the addition of the Viterra fuel and equipment business lines. Gross profit for this product group was $24-million this quarter, an increase from the $22-million reported in the first quarter of 2013.

Services and other sales were $122-million this quarter, compared to the $146-million reported in the first quarter of 2013. The decrease in sales was due to lower sales within Australia, specifically the export of wool, which has been discontinued due to low returns on investment. Gross profit was $84-million in the first quarter of 2014, compared to $61-million for the same period last year. The higher gross profit is attributed to improved margins from the livestock markets and other services in Australia and stronger sales and margins for services and other sales in North America, despite the late start to the spring season.

Retail selling expenses for the first quarter of 2014 were $436-million, an increase of $47-million compared to the $389-million reported in the first quarter of last year. The increase was due to higher payroll and depreciation costs associated with the Viterra operations. International retail selling expenses declined approximately 8 percent in the first quarter of 2014 compared to the same period last year. Total selling expenses as a percentage of sales were 19.5 percent in the first quarter of 2014, compared to 18.2 percent reported in the first quarter last year. The increase is due to the seasonal earnings profile of the Viterra business, which has costs throughout the year, but generates the majority of its earnings in the second and third quarters. Selling expenses as a percentage of sales in the second quarter of 2014 is expected to be similar to or lower than the second quarter of 2013.

Wholesale

Wholesale's 2014 first quarter sales were $1.1-billion, down slightly from the $1.2-billion reported in the same quarter last year. Gross profit was $171-million this quarter, compared to $343-million in the first quarter of 2013. Wholesale Adjusted EBITDA was $237-million in the first quarter of 2014 compared to $393-million reported in the same period last year, with the reduction primarily due to lower sales prices for all major crop nutrients.

Nitrogen gross profit in the first quarter of 2014 was $100-million compared to $186-million in the same quarter last year. Nitrogen sales volumes were 876,000 tonnes in the first quarter of 2014, up 6 percent from the same period last year, primarily due to the carry forward of strong urea demand from the fourth quarter of 2013. This was partially offset by lower ammonia sales volumes compared to the prior year. Realized sales prices for nitrogen declined to $438 per tonne compared to $524 per tonne in the first quarter of 2013 as a result of reduced benchmark nitrogen prices in the fourth quarter of 2013 and the normal two to three month lag in our realized prices relative to these benchmark prices. Nitrogen cost of product sold was $324 per tonne this quarter, an increase from the $300 per tonne reported in the first quarter of 2013 due to higher natural gas costs. Our average nitrogen gross margins were $114 per tonne this quarter, compared to $224 per tonne in the same period last year.

Agrium's average natural gas cost included in cost of product sold (which includes transportation and administration costs) was $5.02/MMBtu this quarter ($4.29/MMBtu including the impact of realized gains on natural gas derivatives), compared to $3.33/MMBtu for the same period in 2013 ($3.54/MMBtu including the impact of realized losses on natural gas derivatives). Hedging gains or losses are included in other expenses and not in cost of product sold, thus are not part of the calculation of gross profit. The average U.S. benchmark (NYMEX) natural gas price for the first quarter of 2014 was $4.90/MMBtu, compared to $3.35/MMBtu in the same quarter last year. The AECO (Alberta) basis differential was a $0.56/MMBtu discount to NYMEX in the first quarter of 2014, an increase from the $0.28/MMBtu discount in the first quarter of 2013.

Agrium has forward hedged gas for approximately 15 to 20 percent of our expected natural gas requirements for the 2016 to 2018 time period at a price of approximately $3.50/MMBtu. Combined with our historical levels of industrial contracts, which have an inherent margin hedge correlated to indexed natural gas prices, this raises our total gas hedge position for this three-year period to approximately one-third of our total gas needs. While we believe North American gas prices will remain highly attractive in future years relative to other parts of the world, the forward strip on North American gas prices have declined to a point where we believe this will lock in highly competitive margins and reduce the longer-term risk profile.

Potash gross profit for the first quarter of 2014 was $46-million, compared to $84-million reported in the same quarter last year. The decrease was driven by lower benchmark and realized sales prices, as well as lower international sales volumes compared to the same period last year, which was partially offset by increased domestic sales volumes. Domestic sales volumes increased to 292,000 tonnes this quarter, compared to 198,000 tonnes in the first quarter of 2013, due to pent up demand in the market at the end of the fourth quarter of 2013. International sales volumes decreased to 136,000 tonnes, compared to 180,000 tonnes in the same period last year, primarily due to logistical challenges in getting product to Vancouver ports. The shortfall in our current quarter's international sales commitments were met through purchased potash. Potash cost of product sold was $191 per tonne this quarter, slightly higher than the $183 per tonne reported in the first quarter of 2013 due to a higher percentage of domestic sales which include freight. Gross margin on a per tonne basis was $107 in the first quarter of 2014, compared to the $221 per tonne realized during the same quarter in 2013.

Phosphate gross profit was $2-million in the first quarter of 2014, compared to $37-million in the same quarter last year. The decrease was due to lower realized sales prices, partially offset by higher sales volumes. Realized phosphate sales prices were $544 per tonne this quarter, a decrease from $698 per tonne in the same period last year. Lower prices were reflective of weak global market conditions experienced in the fourth quarter of 2013 and early in the first quarter of 2014. Phosphate cost of product sold was $536 per tonne in the first quarter of 2013, consistent with the same period last year but down from the fourth quarter of 2013. Phosphate sales volumes were 308,000 tonnes in the first quarter of 2014, up 76,000 tonnes compared to the same period last year. Gross margin in the first quarter of 2014 was $8 per tonne compared to $161 per tonne in the same period last year.

Gross profit from ammonium sulfate and other products was $19-million this quarter compared to $30-million in the same period last year. The decrease was due to lower realized sales prices resulting from competitive pressures. Product purchased for resale gross profit was $4-million in the first quarter of 2014, a $2-million reduction from the same period last year as a result of decreases in all major global nutrient prices, partially offset by higher domestic and international sales volumes.

Wholesale expenses in the first quarter of 2014 were $16-million lower than the same period last year. The decrease was primarily driven by a $24-million increase in gains on natural gas derivatives, resulting from the increase in benchmark natural gas prices. Partially offsetting the gains was lower earnings from associates and joint ventures in the first quarter due to lower prices and sales volumes at both our Egypt and Argentina nitrogen facilities.

Other

EBITDA for our Other non-operating business unit for the first quarter of 2014 was a loss of $68-million, compared to a loss of $62-million for the first quarter of 2013. The unfavorable change was primarily driven by a $15-million increase in share-based payments expense driven by an appreciation of our share price during the first quarter of 2014 and improved share performance relative to our peer group which resulted in an increase in fair value of all of our share-based incentive compensation plans. This unfavorable change was partially offset by a $12-million favorable change in gross profit for the first quarter of 2014 compared to the first quarter of 2013 which reflected more inventory held in our Retail business unit not yet sold to external customers that is at a lower margin than the prior year.

FINANCIAL CONDITION

The following are changes to working capital on our Consolidated Balance Sheets in the three-month period ended March 31, 2014 compared to December 31, 2013.

(millions of U.S. dollars, except as noted)		March 31, 2014	December 31, 2013	$ Change	% Change	Explanation of the change in balance
Current assets
	Cash and cash equivalents	592	801	(209)	(26%)	See discussion under the section "Liquidity and Capital Resources".
	Accounts receivable	2,143	2,105	38	2%	Increased Wholesale trade receivables consistent with the start of the sales season. This was partially offset by decreased Retail North American trade receivables and higher collection of vendor rebates in the first quarter of 2014.
	Income taxes receivable	106	78	28	36%	First quarter tax installments paid exceeded the first quarter tax provision.
	Inventories	4,789	3,413	1,376	40%	Seasonal Retail inventory build-up in preparation for the spring season.
	Prepaid expenses and deposits	379	805	(426)	(53%)	Drawdown of prepaid inventory as Retail took delivery of product in anticipation of the spring season.
	Other current assets	124	104	20	19%	Increase in the amount of investments.
	Assets held for sale	230	202	28	14%	Increased accounts receivable and inventory consistent with the start of the sales season.
Current liabilities
	Short-term debt	397	764	(367)	(48%)	Repayments of commercial paper as customer collections were made in the first quarter.
	Accounts payable	5,721	3,985	1,736	44%	Retail inventory purchases and customer prepayments made in anticipation of the spring season.
	Income taxes payable	2	2	-	0%	-
	Current portion of long-term debt	54	58	(4)	(7%)	-
	Current portion of other provisions	115	112	3	3%	-
	Liabilities held for sale	59	44	15	34%	Increase in accounts payable consistent with the start of the sales season.
Working capital		2,015	2,543	(528)	(21%)

LIQUIDITY AND CAPITAL RESOURCES

Summary of Consolidated Statements of Cash Flows

Below is a summary of our cash provided by or used in operating, investing, and financing activities as reflected in the Consolidated Statements of Cash Flows:

	Three months ended March 31,
(millions of U.S. dollars)	2014	2013	Change
Cash provided by operating activities	788	360	428
Cash used in investing activities	(510)	(384)	(126)
Cash used in financing activities	(467)	(39)	(428)
Effect of exchange rate changes on cash and cash equivalents	(3)	(7)	4
Decrease in cash and cash equivalents from continuing operations	(192)	(70)	(122)
Cash and cash equivalents used in discontinued operations	(17)	(3)	(14)

The sources and uses of cash for the three months ended March 31, 2014 compared to the three months ended March 31, 2013 are summarized as follows:

Cash provided by operating activities - Drivers behind the $428-million source of cash increase
Source of cash	$219-million decrease in income taxes paid resulting primarily from reduced earnings in 2013 and lower taxes paid in the first quarter of 2014 compared to tax payments made in the first quarter of 2013 on 2012 earnings. $342-million increase in cash inflows from non-cash working capital. This was primarily driven by less pre-bought inventory in Retail as a result of lower purchase prices which reduced the incentive to lock in inventory coupled with a decrease in accounts receivable as a result of lower Wholesale selling prices.
Cash used in investing activities - Drivers behind the $126-million use of cash increase
Use of cash	$122-million increase in capital expenditures primarily related to the Vanscoy potash expansion project.
Cash used in financing activities - Drivers behind the $428-million use of cash increase
Use of cash	$414-million due to the repayment of $349-million short-term debt as a result of customer collections early in the first three months of 2014 compared to an issuance of $65-million of short-term debt in the first three months of 2013.

Capital Expenditures

	Three months ended March 31,
(millions of U.S. dollars)	2014	2013
Sustaining capital	114	96
Investing capital	345	241
Total	459	337

Our investing capital expenditures increased in the first three months of 2014 compared to the first three months of 2013 due to increased activity on the Vanscoy potash expansion project.

Short-term Debt

Our short-term debt of $397-million at March 31, 2014 is summarized in note 6 of our Consolidated Financial Statements.

OUTSTANDING SHARE DATA

The number of Agrium's outstanding shares at April 30, 2014 was approximately 144 million. At April 30, 2014, the number of shares issuable pursuant to stock options outstanding (issuable assuming full exercise, where each option granted can be exercised for one common share) was approximately nil.

SELECTED QUARTERLY INFORMATION

(millions of U.S. dollars,		2014		2013		2013		2013	2013		2012		2012		2012
except per share amounts)		Q1		Q4		Q3		Q2	Q1		Q4		Q3		Q2
Sales		3,079		2,867		2,796		6,908	3,156		3,093		2,768		6,669
Gross profit		556		740		629		1,699	705		974		730		1,831
Net earnings from continuing operations		12		110		80		744	146		358		140		859
Net (loss) earnings from discontinued operations		(9	)	(11	)	(4	)	3	(5	)	(4	)	(11	)	1
Net earnings		3		99		76		747	141		354		129		860
Earnings per share from continuing operations attributable to equity holders of Agrium:
	Basic	0.08		0.74		0.54		5.00	0.98		2.37		0.87		5.44
	Diluted	0.08		0.74		0.54		5.00	0.98		2.36		0.87		5.43
(Loss) earnings per share from discontinued operations attributable to equity holders of Agrium:
	Basic	(0.06	)	(0.08	)	(0.02	)	0.02	(0.04	)	(0.03	)	(0.07	)	-
	Diluted	(0.06	)	(0.08	)	(0.02	)	0.02	(0.04	)	(0.02	)	(0.07	)	0.01
Earnings per share attributable to equity holders of Agrium:
	Basic	0.02		0.66		0.52		5.02	0.94		2.34		0.80		5.44
	Diluted	0.02		0.66		0.52		5.02	0.94		2.34		0.80		5.44

The agricultural products business is seasonal in nature. Consequently, comparisons made on a year-over-year basis are more appropriate than quarter-over-quarter comparisons. Crop input sales are primarily concentrated in the spring and fall crop input application seasons, which are in the second quarter and fourth quarter. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete.

BUSINESS ACQUISITION

We completed the acquisition of certain Canadian and Australian agri-products assets of Viterra on October 1, 2013. During March 2014, we finalized our purchase price allocation without change to the fair values disclosed in our 2013 Annual Report. For further information, refer to note 3 of our Consolidated Financial Statements.

DISCONTINUED OPERATIONS

In December 2013, Agrium commenced with a divestment process for the AAT Direct Solutions and Turf and Ornamental businesses that were not transitioned to our Wholesale business unit. For further information, refer to note 2 of our Consolidated Financial Statements.

NORMAL COURSE ISSUER BID

On May 14, 2013, the Toronto Stock Exchange ("TSX") accepted Agrium's notice of intention to make a normal course issuer bid ("NCIB") whereby Agrium may purchase up to 7,472,587 common shares on the TSX and New York Stock Exchange during the period from May 21, 2013 to May 20, 2014 with a daily purchase limit of 133,301 common shares on the TSX. During the period from May 21, 2013 to December 31, 2013, we purchased approximately 5.8 million shares at an average share price of $86 for total consideration of approximately $498-million under our NCIB. There were no share repurchases during the three months ended March 31, 2014. Shareholders can obtain a copy of the NCIB notice submitted to the TSX without charge upon request.

ADDITIONAL IFRS AND NON-IFRS FINANCIAL MEASURES

Certain financial measures in this MD&A are not prescribed by IFRS. We consider these financial measures discussed herein to provide useful information to both management and investors in measuring our financial performance and financial condition.

In general, an additional IFRS financial measure is a measure relevant to understanding a company's financial performance that is not a minimum measure mandated by IFRS. A non-IFRS financial measure generally either excludes or includes amounts that are not excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS. Refer to the following tables for further discussion of how they are calculated and their usefulness to users including management. Non-IFRS financial measures are not recognized measures under IFRS and our method of calculation may not be directly comparable to that of other companies. These non-IFRS measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.

The following table outlines our additional IFRS financial measures, their definitions and how management assesses each measure. As the measures set out below are presented in our Consolidated Financial Statements included in this MD&A, they are classified as additional IFRS financial measures where they reflect consolidated Agrium, and are classified as non-IFRS financial measures where they do not reflect consolidated Agrium, including references to EBITDA when presented on an operating segment basis.

Additional IFRS financial measures	Definition		Management's assessment
EBIT	Earnings (loss) from continuing operations before finance costs and income taxes.		EBIT provides a supplemental measure used by management to: (1) evaluate the effectiveness of our businesses; (2) evaluate our ability to service debt; and (3) determine resource allocations. We believe EBIT is useful to investors, securities analysts and management, as the measure allows for an evaluation of segment performance exclusive of capital structure and income taxes, both of which are not a direct result of the efficiency of each business and are generally accounted for and evaluated on a consolidated basis.

The following table outlines our non-IFRS financial measures, their definitions and usefulness, and how management assesses each measure.

Non-IFRS financial measures	Definition	Management's assessment
EBITDA	Earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization.	Refer to EBIT. This measure is also used by investors and securities analysts as a valuation metric and as an alternative to cash provided by operating activities.
Adjusted EBITDA	EBITDA before finance costs, income taxes, depreciation and amortization of joint ventures.	Refer to EBIT and EBITDA. Management believes that this metric provides useful comparative information on our profitability by adding back finance costs, income taxes, depreciation and amortization of joint ventures.

RECONCILIATIONS OF ADDITIONAL IFRS AND NON-IFRS FINANCIAL MEASURES

Adjusted EBITDA and EBITDA to EBIT

	Three months ended						Three months ended
	March 31, 2014						March 31, 2013
(millions of U.S. dollars)	Retail		Wholesale	Other		Consolidated	Retail		Wholesale	Other		Consolidated
Adjusted EBITDA	17		237	(68	)	186	25		393	(62	)	356
Equity accounted
joint ventures:
Finance costs and income taxes	-		4	-		4	-		7	-		7
Depreciation and amortization	-		2	-		2	-		2	-		2
EBITDA	17		231	(68	)	180	25		384	(62	)	347
Depreciation and amortization	72		53	2		127	53		50	5		108
EBIT	(55	)	178	(70	)	53	(28	)	334	(67	)	239

CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES

We prepare our financial statements in accordance with IFRS, which requires us to make assumptions and estimates about future events and apply significant judgments. We base our assumptions, estimates and judgments on our historical experience, current trends and all available information that we believe is relevant at the time we prepare the financial statements. However, future events and their effects cannot be determined with certainty. Accordingly, as confirming events occur, actual results could ultimately differ from our assumptions and estimates. Such differences could be material. For further information on the Company's critical accounting judgments and estimates, refer to the section "Critical Accounting Judgments and Estimates" of our 2013 annual Management's Discussion and Analysis, which is contained in our 2013 Annual Report. Since the date of our 2013 annual Management's Discussion and Analysis, there have not been any significant changes to our critical accounting judgments and estimates.

CHANGES IN ACCOUNTING POLICIES

The accounting policies applied in our Consolidated Financial Statements are the same as those applied in our audited annual financial statements in our 2013 Annual Report, with the exception of the adoption of IFRS 9 Financial Instruments and other accounting changes described in note 10 of our Consolidated Financial Statements.

For information regarding changes in accounting policies, refer to the section "Accounting Standards and Policy Changes Not Yet Implemented" of our 2013 annual Management's Discussion and Analysis, which is contained in our 2013 Annual Report.

BUSINESS RISKS

The information presented on Enterprise Risk Management and Key Business Risks on pages 74 - 77 in our 2013 Annual Report and under the heading "Risk Factors" on pages 29 - 40 in our 2013 Annual Information Form has not changed materially since December 31, 2013.

CONTROLS AND PROCEDURES

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PUBLIC SECURITIES FILINGS

Additional information about our company, including our 2013 Annual Information Form is filed with the Canadian securities regulatory authorities through SEDAR at www.sedar.com and with the U.S. securities regulatory authorities through EDGAR at www.sec.gov.

OUTLOOK, KEY RISKS AND UNCERTAINTIES

Major crop prices have strengthened from levels at the beginning of 2014, driven by strong demand and increased uncertainty over supply. The improvement in crop prices has led to a rebound in grower sentiment and has been supportive of crop input demand. Combined North American acreage of corn, soybean, cotton and canola is expected to be close to record highs in 2014, which is expected to be supportive of seed demand and for other crop inputs and agronomic services. Crop protection product demand, and associated service component, is expected to continue to be supported by growers' efforts to combat glyphosate resistant weeds with alternative chemistries. Glyphosate prices have been relatively steady so far in 2014 and are generally expected to remain firm.

The start of the spring planting season in North America is behind normal pace as a result of the coldest winter in 30 years throughout many areas of North America and prolonged cold and wet weather in early spring. The large North American crop in 2013, particularly in Canada, combined with the cold winter, have challenged rail and port transportation logistics so far in 2014. In some cases, the delayed start has allowed the crop nutrient supply chain more time for product to move to market. However, constrained logistical capacity is still expected to contribute to tight supply and demand balances within regional markets this season.

Following a strong start to 2014, global urea prices have declined since early February, driven by a seasonal slow-down in import demand and larger than usual supplies available from China. In North America, urea prices have declined from peak levels, but remain at a premium relative to import parity due to a tight supply and demand balance. U.S. offshore urea imports began the 2013/14 fertilizer year at a slow pace, but picked up as the spring season approached. Chinese urea exports will be a key driver of the nitrogen market in 2014. China exported the same volume of urea in the first two months of 2014 as it did in the first half of 2013. Another uncertainty in the nitrogen global market is the unrest between Russia and Ukraine, which could impact urea export availability from this region.

Pent up demand has provided support to global and North American potash markets so far in 2014. Data from the International Plant Nutrition Institute shows producer shipments in North America were up almost 50 percent in the first quarter of 2014 compared to 2013 levels. However, tight Canadian rail capacity, has constrained both domestic North American and export shipments. This has led to some regional tightness within North America and firm pricing. Globally, spot market prices have increased from early 2014 levels, driven by tighter potash export supply availability. Brazilian demand has been an important driver as Brazilian potash imports have begun 2014 at a similar pace to record 2013 levels. Furthermore, both China and India have signed supply agreements for 2014 which has provided the global marketplace with increased visibility.

Similar to the urea market, export phosphate prices have declined following a strong rally to begin 2014. Phosphate prices were supported by the combination of pent up demand and supply disruptions. Shipments of phosphate from Morocco were restricted in the first quarter of 2014 by adverse weather. Analysts expect Indian import demand to increase by approximately one million tonnes in 2014/15 as domestic Indian inventories of DAP are significantly below last year's levels. Global phosphate prices and the value of the Indian rupee will be important drivers of Indian DAP imports in the coming months. For most phosphate producers, sulfur and ammonia costs have increased to levels similar to where they were at this time a year ago which may lend some support to phosphate prices.

Forward-Looking Statements

Certain statements and other information included in this MD&A constitute "forward-looking information" within the meaning of applicable Canadian securities legislation or constitute "forward-looking statements" within the meaning of applicable U.S. securities legislation (collectively, the "forward-looking statements"). All statements in this MD&A other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to, statements as to management's expectations with respect to: future crop and crop input volumes, demand, margins, prices and sales; business and financial prospects; dividends and other plans, strategies, objectives and expectations, including with respect to future operations of Agrium and proposed acquisitions and divestitures and the growth and stability of our earnings. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements.

All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below in this MD&A. Although Agrium believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The key assumptions that have been made in connection with the forward-looking statements include Agrium's ability to successfully integrate and realize the anticipated benefits of its already completed and future acquisitions.

Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general economic, market and business conditions, weather conditions including impacts from regional flooding and/or drought conditions; crop prices; the supply and demand and price levels for our major products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy, government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof, and political risks, including civil unrest, actions by armed groups or conflict, as well as counterparty and sovereign risk; and other risk factors detailed from time to time in Agrium reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States. There is a risk that the Egyptian Misr Fertilizer Production Company nitrogen facility in Egypt may not be allowed to proceed with the completion of the two new facilities. Additionally, there are risks associated with Agrium's acquisition of AWB, including litigation risk resulting from AWB having been named in litigation commenced by the Iraqi Government relating to the United Nations Oil-For-Food Programme. There are risks associated with our acquisition of certain Retail Agri-products assets of Viterra, including: timing and costs of the associated integration of the retained Viterra Retail Agri-products assets; the size and timing of expected synergies could be less favorable than anticipated; and other risk factors detailed from time to time in Agrium reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States. Furthermore, the potential divestiture of the Turf and Ornamental and Direct Solutions businesses and any potential financial gains or losses resulting from the completion of the strategic review process may differ materially from those in the forward-looking statements.

The purpose of our guidance for the second quarter of 2014 included herein is to assist readers in understanding our expected and targeted financial results and this information may not be appropriate for other purposes.

Agrium disclaims any intention or obligation to update or revise any forward-looking statements in this MD&A as a result of new information or future events, except as may be required under applicable U.S. federal securities laws or applicable Canadian securities legislation.

OTHER

Agrium Inc. is a major Retail supplier of agricultural products and services in North America, South America and Australia and a leading global Wholesale producer and marketer of all three major agricultural nutrients and the premier supplier of specialty fertilizers in North America. Agrium's strategy is to provide the crop inputs and services needed to feed a growing world. We focus on maximizing shareholder returns by driving continuous improvements to our base businesses, pursuing value-added growth opportunities across the crop input value chain and returning capital to shareholders.

A WEBSITE SIMULCAST of the 2014 1^st Quarter Conference Call will be available in a listen-only mode beginning Wednesday, May 7^th, 2014 at 7:30 a.m. MST (9:30 a.m. EST). Please visit the following website: www.agrium.com.

AGRIUM INC.
Consolidated Statements of Operations
(Millions of U.S. dollars, except per share amounts)
(Unaudited)

		Three months ended
		March 31,
		2014		2013⁽¹⁾

Sales		3,079		3,156
Cost of product sold		2,523		2,451
Gross profit		556		705
Expenses
	Selling	444		396
	General and administrative	100		94
	Earnings from associates and joint ventures	(1	)	(13	)
	Other income (note 4)	(40	)	(11	)
Earnings before finance costs and income taxes		53		239
	Finance costs related to long-term debt	19		22
	Other finance costs	17		18
Earnings before income taxes		17		199
	Income taxes	5		53
Net earnings from continuing operations		12		146
Net loss from discontinued operations (note 2)		(9	)	(5	)
Net earnings		3		141
Attributable to:
	Equity holders of Agrium	2		141
	Non-controlling interest	1		-
Net earnings		3		141

Earnings per share attributable to equity holders of Agrium (note 5)
	Basic and diluted earnings per share from continuing operations	0.08		0.98
	Basic and diluted loss per share from discontinued operations	(0.06	)	(0.04	)
	Basic and diluted earnings per share	0.02		0.94
⁽¹⁾ Certain amounts have been reclassified as a result of discontinued operations. See note 2, Discontinued Operations, Assets and Liabilities
Held for Sale.

See accompanying notes.

AGRIUM INC.
Consolidated Statements of Comprehensive Income
(Millions of U.S. dollars)
(Unaudited)

					Three months ended
					March 31,
					2014		2013

Net earnings					3		141
	Other comprehensive loss
		Items that are or may be reclassified to earnings
			Share of comprehensive income of associates and joint ventures		1		1
			Foreign currency translation differences
				Losses	(106	)	(24	)
	Other comprehensive loss				(105	)	(23	)
Comprehensive (loss) income					(102	)	118
Attributable to:
	Equity holders of Agrium				(103	)	118
	Non-controlling interest				1		-
Comprehensive (loss) income					(102	)	118
See accompanying notes.

AGRIUM INC.
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
(Unaudited)

			Three months ended
			March 31,
			2014		2013⁽¹⁾

Operating
	Net earnings from continuing operations		12		146
	Adjustments for
		Depreciation and amortization	127		108
		Earnings from associates and joint ventures	(1	)	(13	)
		Share-based payments	31		16
		Unrealized gain on derivative financial instruments	(14	)	(7	)
		Unrealized foreign exchange (gain) loss	(2	)	16
		Interest income	(11	)	(15	)
		Finance costs	36		40
		Income taxes	5		53
		Other	12		5
	Interest received		12		15
	Interest paid		(32	)	(56	)
	Income taxes paid		(36	)	(255	)
	Dividends from associates and joint ventures		1		1
	Net changes in non-cash working capital		648		306
Cash provided by operating activities			788		360
Investing
	Acquisitions, net of cash acquired		(16	)	(34	)
	Capital expenditures		(459	)	(337	)
	Capitalized borrowing costs		(23	)	(9	)
	Purchase of investments		(26	)	(8	)
	Proceeds from disposal of investments		12		-
	Other		(22	)	(10	)
	Net changes in non-cash working capital		24		14
Cash used in investing activities			(510	)	(384	)
Financing
	Short-term debt		(349	)	65
	Long-term debt issued		-		10
	Repayment of long-term debt		(10	)	(41	)
	Dividends paid		(108	)	(75	)
	Shares issued		-		2
Cash used in financing activities			(467	)	(39	)
Effect of exchange rate changes on cash and cash equivalents			(3	)	(7	)
Decrease in cash and cash equivalents from continuing operations			(192	)	(70	)
Cash and cash equivalents used in discontinued operations (note 2)			(17	)	(3	)
Cash and cash equivalents - beginning of period			801		658
Cash and cash equivalents - end of period			592		585
⁽¹⁾ Certain amounts have been reclassified as a result of discontinued operations. See note 2, Discontinued Operations, Assets and Liabilities Held for Sale.

See accompanying notes.

AGRIUM INC.
Consolidated Balance Sheets
(Millions of U.S. dollars)
(Unaudited)

			March 31,			December 31,
			2014		2013	2013
Assets
	Current assets
		Cash and cash equivalents	592		585	801
		Accounts receivable	2,143		2,395	2,105
		Income taxes receivable	106		103	78
		Inventories	4,789		4,604	3,413
		Advance on acquisition of Viterra Inc. (note 3)	-		1,774	-
		Prepaid expenses and deposits	379		544	805
		Other current assets	124		-	104
		Assets held for sale (note 2)	230		-	202
			8,363		10,005	7,508
	Property, plant and equipment (note 8)		5,193		3,705	4,960
	Intangibles		724		616	738
	Goodwill		1,970		2,356	1,958
	Investments in associates and joint ventures		639		645	639
	Other assets		114		113	99
	Deferred income tax assets		78		89	75
			17,081		17,529	15,977
Liabilities and shareholders' equity
	Current liabilities
		Short-term debt (note 6)	397		1,370	764
		Accounts payable	5,721		5,259	3,985
		Income taxes payable	2		-	2
		Current portion of long-term debt	54		478	58
		Current portion of other provisions	115		103	112
		Liabilities held for sale (note 2)	59		-	44
			6,348		7,210	4,965
	Long-term debt		3,058		2,078	3,066
	Post-employment benefits		131		185	135
	Other provisions		410		422	426
	Other liabilities		35		78	59
	Deferred income tax liabilities		514		594	530
			10,496		10,567	9,181
	Shareholders' equity
		Share capital	1,820		1,892	1,820
		Retained earnings	5,139		5,019	5,253
		Accumulated other comprehensive (loss) income	(376	)	48	(279	)
		Equity holders of Agrium	6,583		6,959	6,794
		Non-controlling interest	2		3	2
			6,585		6,962	6,796
			17,081		17,529	15,977
See accompanying notes.

AGRIUM INC.
Consolidated Statements of Shareholders' Equity
(Millions of U.S. dollars, except share data)
(Unaudited)

							Other comprehensive income
			Millions of common shares	Share capital	Retained earnings		Available for sale financial instruments		Foreign currency translation		Comprehensive loss of associates and joint ventures		Total		Equity holders of Agrium		Non- controlling interest		Total equity
December 31, 2012			149	1,890	4,955		-		74		(3	)	71		6,916		4		6,920
	Net earnings		-	-	141		-		-		-		-		141		-		141
	Other comprehensive income (loss), net of tax
		Other	-	-	-		-		(24	)	1		(23	)	(23	)	-		(23	)
	Comprehensive income (loss), net of tax		-	-	141		-		(24	)	1		(23	)	118		-		118
	Dividends		-	-	(75	)	-		-		-		-		(75	)	-		(75	)
	Non-controlling interest transactions		-	-	(2	)	-		-		-		-		(2	)	(1	)	(3	)
	Share-based payment transactions		-	2	-		-		-		-		-		2		-		2
March 31, 2013			149	1,892	5,019		-		50		(2	)	48		6,959		3		6,962

December 31, 2013			144	1,820	5,253		(8	)	(264	)	(7	)	(279	)	6,794		2		6,796
	Net earnings		-	-	2		-		-		-		-		2		1		3
	Other comprehensive income (loss), net of tax
		Other	-	-	-		-		(106	)	1		(105	)	(105	)	-		(105	)
	Comprehensive income (loss), net of tax		-	-	2		-		(106	)	1		(105	)	(103	)	1		(102	)
	Dividends		-	-	(108	)	-		-		-		-		(108	)	-		(108	)
	Non-controlling interest transactions		-	-	-		-		-		-		-		-		(1	)	(1	)
	Impact of adopting IFRS 9 at January 1, 2014		-	-	(8	)	8		-		-		8		-		-		-
March 31, 2014			144	1,820	5,139		-		(370	)	(6	)	(376	)	6,583		2		6,585
See accompanying notes.

AGRIUM INC.

Summarized Notes to the Consolidated Financial Statements

For the three months ended March 31, 2014

(Millions of U.S. dollars, except per share amounts)

(Unaudited)

1. Corporate Information

Corporate information

Agrium Inc. ("Agrium") is incorporated under the laws of Canada with common shares listed under the symbol "AGU" on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX). Our Corporate head office is located at 13131 Lake Fraser Drive S.E., Calgary, Canada. We conduct our operations globally from our Wholesale head office in Calgary and our Retail head office in Loveland, Colorado, United States. In these financial statements, "we", "us", "our" and "Agrium" mean Agrium Inc., its subsidiaries and joint arrangements.

Agrium operates two core strategic business units:

Retail: Distributes crop nutrients, crop protection products, seed and services directly to growers through a network of farm centers in two geographical segments:
- North America, including the United States and Canada; and
- International, including Australia and South America.
Wholesale: Operates in North and South America and Europe, and produces, markets and distributes crop nutrients and industrial products through the following businesses:
- Nitrogen: Manufacturing in Alberta, Texas and Argentina, and production of ESN^®, (Environmentally Smart Nitrogen) polymer-coated nitrogen crop nutrients;
- Potash: Mining and processing in Saskatchewan;
- Phosphate: Owning and operating mines and production facilities in Alberta and Idaho;
- Product purchased for resale: Marketing nutrient products from other suppliers in North and South America and Europe; and
- Ammonium sulfate and other: Producing blended crop nutrients and micronutrients.

Additional information on our operating segments is included in note 9.

Basis of preparation and statement of compliance

These consolidated interim financial statements ("interim financial statements") were approved for issuance by the Audit Committee on May 6, 2014. We prepared these interim financial statements in accordance with International Accounting Standard 34 Interim Financial Reporting. These statements do not include all information and disclosures normally provided in annual financial statements and should be read in conjunction with our audited annual financial statements and related notes contained in our 2013 Annual Report, available at www.agrium.com.

The accounting policies applied in these interim financial statements are the same as those applied in our audited annual financial statements in our 2013 Annual Report, with the exception of the adoption of IFRS 9 Financial Instruments and other accounting changes described in note 10.

Seasonality in our business results from increased demand for our products during planting seasons. Sales are generally higher in spring and fall.

2. Discontinued Operations, Assets and Liabilities Held for Sale

		Three months ended
Condensed information of discontinued operations		March 31,
		2014		2013
Operating information
Discontinued operations of assets held for sale
	Sales	60		68
	Expenses	71		75
	Loss before income taxes	(11	)	(7	)
	Income tax recovery	(2	)	(2	)
Net loss from discontinued operations		(9	)	(5	)
Cash used in operating activities		(17	)	(3	)

Balance sheet information		March 31,
		2014
Accounts receivable		81
Inventories		94
Property, plant and equipment		26
Intangibles		27
Deferred income tax assets		2
Assets held for sale		230
Accounts payable		58
Income taxes payable		1
Liabilities held for sale		59

3. Business Acquisition

Viterra Inc.

We completed the acquisition of 100 percent of certain Canadian and Australian agri-products assets of Viterra Inc. on October 1, 2013. We engaged independent valuation experts to assist us in determining the fair value of the assets acquired and liabilities assumed. During March 2014, we finalized our purchase price allocation without change to the fair values disclosed in our 2013 Annual Report.

4. Other Expenses

	Three months ended
Other expenses	March 31,
	2014		2013
Realized gain on derivative financial instruments	(33	)	(14	)
Unrealized gain on derivative financial instruments	(14	)	(7	)
Foreign exchange loss	12		19
Interest income	(11	)	(15	)
Environmental remediation and asset retirement obligations	(2	)	1
Bad debt expense	5		5
Potash profit and capital tax	3		4
Other	-		(4	)
	(40	)	(11	)

5. Earnings per Share

		Three months ended
Attributable to equity holders of Agrium		March 31,
		2014		2013
Numerator
	Net earnings from continuing operations	11		146
	Net loss from discontinued operations	(9	)	(5	)
	Net earnings	2		141
Denominator (millions)
	Weighted average number of shares outstanding for basic and diluted earnings per share	144		149

6. Debt

			March 31,		December 31,
				2014	2013
		Maturity	Rate
Short-term debt
	Commercial paper	2014	0.29	150	503
	Credit facilities		2.02	247	261
				397	764

In April 2014, we filed a Base Shelf Prospectus permitting the issuance of up to $2.5-billion of common shares, debt and other securities until May 2016. Issuance of securities requires us to file a prospectus supplement and is subject to availability of funding in capital markets.

7. Financial Instruments

Natural gas derivatives outstanding			March 31,					December 31,
			2014					2013
			Notional		Maturities		Fair value of assets (liabilities)	Notional		Maturities		Fair value of assets (liabilities)
		AECO Swaps (BCF)	60		2014-2018		15	8		2014		-
							15					-

			Gross				Carrying	Gross				Carrying
Balance sheet presentation			amount		Netting		amount	amount		Netting		amount
	Accounts receivable		36		(33	)	3	26		(26	)	-
	Other assets		189		(177	)	12	-		-		-
	Accounts payable		(33	)	33		-	(26	)	26		-
	Other liabilities		(177	)	177		-	-		-		-
			15		-		15	-		-		-


		March 31,
		2014
Classification of financial instruments measured at fair value		Fair value		Carrying value
		Level 1	Level 2
Accounts receivable - derivatives		6	-	6
Other current financial assets - marketable securities		21	86	107
Other financial assets - derivatives		12	-	12
Accounts payable - derivatives		5	-	5
Classification of fair value of long-term debt
	Debentures	-	3,269	2,990

		December 31,
		2013
Classification of financial instruments measured at fair value		Fair value		Carrying value
		Level 1	Level 2	Carrying value
Cash and cash equivalents		-	801	801
Accounts receivable - derivatives		1	-	1
Other current financial assets
	Available for sale - equities	14	-	14
	Available for sale - fixed income	-	90	90
Other financial assets
	Available for sale	12	-	12
Accounts payable - derivatives		-	2	2
Classification of fair value of long-term debt
	Debentures	-	3,124	2,989

There have been no transfers between Level 1 and Level 2 fair value measurements in the three months ended March 31, 2014 or March 31, 2013. We do not measure any of our financial instruments using Level 3 inputs.

8. Additional Information

Property, plant and equipment

During the three months ended March 31, 2014, we added $290-million to assets under construction at our Vanscoy Potash facility.

Dividends
March 31,
2014
Declared			Paid to Shareholders	Total
Effective	Per share	Total
December 12, 2013	0.75	108	January 16, 2014	108
February 21, 2014	0.75	108	April 17, 2014	NA

Share capital

During the three months ended March 31, 2014, we granted share-based compensation awards to officers and employees consisting of 418,482 Tandem Stock Appreciation Rights with a grant price of $90.53 and 215,073 Performance Share Units.

Our authorized share capital consists of unlimited common shares without par value and unlimited preferred shares.

9. Operating Segments

			Three months ended
			March 31,
Segment operations			2014		2013
Sales
	Retail
		North America	1,721		1,590
		International	511		549
	Total Retail		2,232		2,139
	Wholesale
		Nitrogen	383		434
		Potash	128		152
		Phosphate	167		162
		Product purchased for resale	294		352
		Ammonium sulfate and other	89		92
	Total Wholesale		1,061		1,192
	Other		(214	)	(175	)
			3,079		3,156
Inter-segment sales
	Retail		5		4
	Wholesale		209		171
			214		175
Earnings before income taxes
	Retail
		North America	(82	)	(23	)
		International	27		(5	)
	Total Retail		(55	)	(28	)
	Wholesale
		Nitrogen	100		186
		Potash	46		84
		Phosphate	2		37
		Product purchased for resale	4		6
		Ammonium sulfate and other	19		30
			171		343
		Unallocated expenses	(7	)	9
	Total Wholesale		178		334
	Other		(70	)	(67	)
	Earnings before finance costs and income taxes		53		239
	Finance costs related to long-term debt		19		22
	Other finance costs		17		18
Earnings before income taxes			17		199

		Three months ended
		March 31,
		2014	2013
Retail sales
	Crop nutrients	896	802
	Crop protection products	730	786
	Seed	298	285
	Merchandise	186	120
	Services and other	122	146
		2,232	2,139

During the three months ended March 31, 2014, reports reviewed on a regular basis by our senior leadership team ceased to include the separate results of ESN and Micronutrients, which we have reported in the preceding tables with the results of our Nitrogen and Ammonium Sulfate and Other segments. We have revised comparative figures to reflect the new classification.

10. Significant Accounting Policies

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied by Agrium in our 2013 Annual Report.

New or amended	Standard/ interpretation	Description	Agrium's date and method of adoption	Impact
New	IFRS 9	Financial Instruments (as amended in November 2013) replaces previous guidance on the classification and measurement of non-derivative financial assets. IFRS 9 also adds guidance replacing previous hedge accounting requirements to more closely align the accounting with risk management activities.	Adopted all of the requirements of IFRS 9 on January 1, 2014, retrospectively without restatement of prior periods	As described below
Amended	IAS 32	Offsetting Financial Assets and Liabilities clarifies requirements for the rights of set-off and provisions on net settlement.	Adopted January 1, 2014, retrospectively	No material impact
New	IFRIC 21	Levies establishes guidance on accounting for levies imposed by governments.	Adopted January 1, 2014, retrospectively	No material impact

Impact of Adoption of IFRS 9 (2013)

On adoption of IFRS 9, in accordance with its transitional provisions, we have not restated prior periods but have classified the financial assets that we held at January 1, 2014 retrospectively based on the new classification requirements and the characteristics of each financial instrument at the transition date. Adoption of IFRS 9 resulted in balance sheet reclassifications without impact to earnings.

Accounting policy changes adopted under IFRS 9 Financial Instruments

We recognize a financial asset or a financial liability when we become a party to the contractual provisions of the instrument. We classify and measure financial assets on initial recognition as described below.

Classification of financial instruments
Characteristics of financial assets		Category on initial recognition
If the objective of our business model for a debt investment is to:		Amortized cost
	- Hold the asset to collect the contractual cash flows; and
	- The contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest.
All financial instruments not at amortized cost		Fair value


Recognition and measurement of financial instruments
	Fair value through profit or loss ("FVTPL")	Fair value through other comprehensive income ("FVTOCI")	Financial assets and liabilities at amortized cost ("AC")
Instrument type	Debt, equity or derivative	Equity	Debt
Measurement	Fair value	Fair value	Amortized cost
Fair value gains (losses)	Profit or loss	Other comprehensive income ⁽¹⁾⁽²⁾	-
Interest and dividends	Profit or loss	Profit or loss	Profit or loss: effective interest rate
Impairment	Profit or loss (assets)	Other comprehensive income ⁽²⁾	Profit or loss (assets)
Foreign exchange	Profit or loss	Other comprehensive income ⁽²⁾	Profit or loss
Transaction costs	Profit or loss	Included in cost of instrument	Included in cost of instrument

⁽¹⁾		For equity investments not held for trading, we may make an irrevocable election at initial recognition to recognize changes in fair value through other comprehensive income rather than profit or loss. We did not make any such elections.
⁽²⁾		If we elect to present unrealized and realized fair value gains and losses on equity investments in other comprehensive income, there is no subsequent recycling of fair value gains and losses to profit or loss. We would recognize dividends from such investments in profit or loss as long as they represent a return on investment.
⁽³⁾		We may make an election under certain circumstances to irrevocably designate a financial asset or financial liability as measured at fair value. We did not make any such elections.

For financial liabilities, IFRS 9 retains most of the IAS 39 requirements. Because we do not have any financial liabilities designated at fair value through profit or loss or embedded derivatives, the adoption of IFRS 9 did not impact our accounting policies for financial liabilities or derivative financial instruments. We do not currently carry any derivative investments that we have designated as hedging instruments.

We recognize purchases and sales of financial assets on the trade date, which is the date on which we commit to purchase or sell the asset. We derecognize financial assets when the rights to receive cash flows from the investments have expired or we have transferred them, and we have transferred substantially all risks and rewards of ownership. We recognize derivative contracts with physical delivery that meet certain conditions on the settlement date.

Classification of financial instruments

Financial instrument	Category under IAS 39	Category under IFRS 9
Financial assets
Cash and cash equivalents ⁽¹⁾	FVTPL	AC
Accounts receivable - trade ⁽¹⁾	L&R	AC
Accounts receivable - derivatives	FVTPL	FVTPL
Advance on acquisition of Viterra Inc. ⁽¹⁾	L&R	-
Other financial assets - marketable securities ⁽²⁾	AFS	FVTPL
Other financial assets - receivables	L&R	AC
Other financial assets - investments ⁽³⁾	AFS	AC
Other financial assets - derivatives	FVTPL	FVTPL
Financial liabilities
Short-term debt ⁽¹⁾	AC	AC
Accounts payable - trade ⁽¹⁾	AC	AC
Accounts payable - derivatives	FVTPL	FVTPL
Long-term debt	AC	AC
Other financial liabilities	AC	AC
Other financial liabilities - derivatives	FVTPL	FVTPL

⁽¹⁾		Carrying value approximates fair value due to the short-term nature of the instruments.
⁽²⁾		We reclassified marketable securities of $104-million classified as current assets available for sale at January 1, 2014 to fair value through profit or loss ($95-million) and amortized cost ($9-million) without any fair value gain or loss on reclassification. We transferred net accumulated fair value losses of $8-million on these securities classified as available for sale at January 1, 2014 to retained earnings.
⁽³⁾		We reclassified investments of $12-million classified as non-current assets available for sale at January 1, 2014 to amortized cost without any gain or loss on reclassification.


AGRIUM INC.
Supplemental Information 1
Results by Business Unit
(Millions of U.S. dollars)
(Unaudited)

		Three months ended March 31,
		2014
		Retail		Wholesale		Other		Total
Sales	- external	2,227		852		-		3,079
	- inter-segment	5		209		(214	)	-
Total sales		2,232		1,061		(214	)	3,079
Cost of product sold		1,845		890		(212	)	2,523
Gross profit		387		171		(2	)	556
Gross profit (%)		17		16				18
Selling		436		11		(3	)	444
General and administrative		28		10		62		100
Earnings from associates and joint ventures		(1	)	-		-		(1	)
Other (income) expenses		(21	)	(28	)	9		(40	)
EBIT ⁽¹⁾		(55	)	178		(70	)	53
EBITDA ⁽²⁾		17		231		(68	)	180
Adjusted EBITDA ⁽²⁾		17		237		(68	)	186

		Three months ended March 31,
		2013
		Retail		Wholesale ⁽³	⁾	Other ⁽⁴	⁾	Total ⁽⁴	⁾
Sales	- external	2,135		1,021		-		3,156
	- inter-segment	4		171		(175	)	-
Total sales		2,139		1,192		(175	)	3,156
Cost of product sold		1,763		849		(161	)	2,451
Gross profit		376		343		(14	)	705
Gross profit (%)		18		29				22
Selling		389		11		(4	)	396
General and administrative		25		20		49		94
(Earnings) loss from associates and joint ventures		(1	)	(13	)	1		(13	)
Other (income) expenses		(9	)	(9	)	7		(11	)
EBIT ⁽¹⁾		(28	)	334		(67	)	239
EBITDA ⁽²⁾		25		384		(62	)	347
Adjusted EBITDA ⁽²⁾		25		393		(62	)	356

⁽¹⁾ Earnings (loss) from continuing operations before finance costs and income taxes.

⁽²⁾ Certain measures presented in this table are not recognized measures under IFRS. Refer to Supplemental Information 6.

⁽³⁾ Restated for the results of ESN and Micronutrients businesses that have transitioned to our Wholesale business unit.

⁽⁴⁾ Restated for reclassifications resulting from discontinued operations.


AGRIUM INC.
Supplemental Information 2
Product Lines
(Millions of U.S. dollars)
(Unaudited)

		Three months ended March 31,
		2014						2013
		Sales		Cost of product sold ⁽¹⁾		Gross profit		Sales		Cost of product sold ⁽¹⁾		Gross profit

Retail ⁽²⁾
	Crop nutrients	896		768		128		802		681		121
	Crop protection products	730		625		105		786		658		128
	Seed	298		252		46		285		241		44
	Merchandise	186		162		24		120		98		22
	Services and other	122		38		84		146		85		61
		2,232		1,845		387		2,139		1,763		376
Wholesale ⁽³⁾
	Nitrogen	383		283		100		434		248		186
	Potash	128		82		46		152		68		84
	Phosphate	167		165		2		162		125		37
	Product purchased for resale	294		290		4		352		346		6
	Ammonium sulfate and other	89		70		19		92		62		30
		1,061		890		171		1,192		849		343
Other inter-segment eliminations ⁽⁴⁾		(214	)	(212	)	(2	)	(175	)	(161	)	(14	)
Total ⁽⁴⁾		3,079		2,523		556		3,156		2,451		705

Wholesale equity accounted joint venture results:
	Nitrogen - international	27		18		9		39		24		15
	Product purchased for resale	21		20		1		31		30		1
		48		38		10		70		54		16
Total Wholesale including equity accounted joint ventures ⁽³⁾		1,109		928		181		1,262		903		359

⁽¹⁾ Includes depreciation and amortization.

⁽²⁾ International Retail sales were $511-million (2013 - $549-million) and gross profit was $104-million (2013 - $97-million) for the three months ended March 31.

⁽³⁾ Restated for the results of ESN and Micronutrients businesses that have transitioned to our Wholesale business unit.

⁽⁴⁾ Restated for reclassifications resulting from discontinued operations.


AGRIUM INC.
Supplemental Information 3
Selected Volumes and Sales Prices
(Unaudited)

				Three months ended March 31,
				2014				2013
				Sales tonnes (000's)	Selling price ($/tonne)	Cost of product sold ($/tonne)	Margin ($/tonne)	Sales tonnes (000's)	Selling price ($/tonne)	Cost of product sold ($/tonne)	Margin ($/tonne)
Retail
	Crop nutrients
		North America		1,400	502			1,061	580
		International		426	453			347	539
Total crop nutrients				1,826	491	421	70	1,408	570	484	86
Wholesale ⁽¹⁾
	Nitrogen
		North America
			Ammonia	179	498			193	606
			Urea	382	441			322	543
			ESN	84	569			81	642
			Other	231	339			231	386
Total nitrogen				876	438	324	114	827	524	300	224

	Potash
		North America		292	342			198	473
		International		136	204			180	327
Total potash				428	298	191	107	378	404	183	221

	Phosphate			308	544	536	8	232	698	537	161
	Product purchased for resale			805	365	360	5	763	462	454	8
	Ammonium sulfate			92	306	172	134	72	434	186	248
	Other			127				106

Total Wholesale				2,636	403	338	65	2,378	501	357	144

Wholesale equity accounted joint ventures:
	Nitrogen - international			62	433	282	151	78	496	299	197
	Product purchased for resale			64	328	320	8	79	389	381	8
				126	380	302	78	157	442	340	102
Total Wholesale including joint ventures⁽¹⁾				2,762	401	336	65	2,535	498	356	142

⁽¹⁾ Restated for the results of ESN and Micronutrients businesses that have transitioned to our Wholesale business unit.


AGRIUM INC.
Supplemental Information 4
Depreciation and Amortization
(Millions of U.S. dollars)
(Unaudited)

		Three months ended March 31,
		2014				2013
		Cost of product sold	Selling	General and administrative	Total	Cost of product sold	Selling	General and administrative	Total

Retail		1	68	3	72	1	49	3	53
Wholesale ⁽¹⁾
	Nitrogen	22				17
	Potash	13				11
	Phosphate	13				14
	Ammonium sulfate and other	3				1
		51	-	2	53	43	-	7	50
Other		-	-	2	2	-	-	5	5
Total ⁽²⁾		52	68	7	127	44	49	15	108

⁽¹⁾ Restated for the results of ESN and Micronutrients businesses that have transitioned to our Wholesale business unit.

⁽²⁾ Restated for reclassifications resulting from discontinued operations.


AGRIUM INC.
Supplemental Information 5 ⁽¹⁾
Selected Financial Measures
(Millions of U.S. dollars, unless stated otherwise)
(Unaudited)

	Rolling four quarters ended March 31,
	2014		2013
	Retail	Consolidated Agrium	Retail	Consolidated Agrium ⁽²⁾
Return on operating capital employed (%) ^(3a)	16	13	15	24
Return on capital employed (%) ^(3b)	9	10	8	17
Average non-cash working capital to sales (%)	19	16	20	16
Operating coverage ratio (%) ^(3c)	73	60	72	48
EBITDA to sales (%) ^(3d)	8	12	8	17


	March 31,
	2014		2013
	Retail	Consolidated Agrium	Retail	Consolidated Agrium
Non-cash working capital	1,512	1,579	1,810	2,285


North America measures	Rolling four quarters ended March 31,
	2014		2013
	Retail		Retail
Return on operating capital employed (%) ^(3a)	26		21
Return on capital employed (%) ^(3b)	13		10
EBITDA to sales (%) ^(3d)	12		9

⁽¹⁾ Certain measures presented in this table are not recognized measures under IFRS. Refer to Supplemental Information 6.
⁽²⁾ Restated for reclassifications resulting from discontinued operations.
⁽³⁾ Adjusted 2014 amounts removing the impact of the purchase gain and goodwill impairment.
	^(a) Retail 15%, Retail - North America 18%, Consolidated Agrium 13%.
	^(b) Retail 8%, Retail - North America 9%, Consolidated Agrium 10%.
	^(c) Retail 74%, Consolidated Agrium 61%.
	^(d) Retail 8%, Retail - North America 9%, Consolidated Agrium 12%.


AGRIUM INC.
Supplemental Information 6 ⁽¹⁾
Accompanying Notes to Supplemental Information

IFRS Financial Measure	Definition
Average non-cash working capital to sales ⁽²⁾	Rolling four quarter average non-cash working capital divided by sales.
Operating coverage ratio ⁽²⁾	Gross profit less earnings (loss) from continuing operations before finance costs and income taxes, divided by gross profit.
Non-cash working capital ⁽²⁾	Current assets less current liabilities, excluding cash and cash equivalents, other current assets, short-term debt, current portion of long-term debt and current assets and liabilities held for sale.
	Definition	Usefulness of Additional or Non-IFRS Financial Measure
Additional IFRS Financial Measure (As defined in Canadian Securities Administrators' Staff Notice 52-306 (Revised))
EBIT	Earnings (loss) from continuing operations before finance costs and income taxes.	Used to measure operating performance exclusive of capital structure and income taxes.
Return on operating capital employed ⁽²⁾	Last 12 months' EBIT less income taxes at a tax rate of 27 percent (2013 - 27 percent) divided by rolling four quarter average operating capital employed. Operating capital employed includes non-cash working capital, property, plant and equipment, investments in associates and joint ventures and other assets.	Used to measure operating performance and efficiency of our capital allocation process.
Return on capital employed ⁽²⁾	Last 12 months' EBIT less income taxes at a tax rate of 27 percent (2013 - 27 percent) divided by rolling four quarter average capital employed. Capital employed includes operating capital employed, intangibles and goodwill.	Used to measure operating performance and efficiency of our capital allocation process.
Non-IFRS Financial Measure
EBITDA	Earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization.	Refer to EBIT. Also used as a valuation metric and as an alternative to cash provided by operating activities.
Adjusted EBITDA	EBITDA before finance costs, income taxes, depreciation and amortization of joint ventures.	Refer to EBIT and EBITDA. Provides useful information on our profitability by adding back finance costs, income taxes, depreciation and amortization of joint ventures.
EBITDA to sales	EBITDA divided by sales.	Used to measure operating performance earnings and cash flow we generate from each dollar of sales.
Capital expenditures	Capital expenditures - sustaining: Cost of replacements and betterments to our facilities.	Used to evaluate capital spending on improving existing operations and capacity, or on business expansion and development.
	Capital expenditures - investing: Cost of significant expansion of our existing operations.

⁽¹⁾ Our definitions and our method of calculation for these measures may not be directly comparable to similar measures presented by other companies.

⁽²⁾ These measures are IFRS measures or additional IFRS measures when calculated using information included in our consolidated financial statements. They are classified as non-IFRS measures when calculated using information from our Retail or Wholesale segments because the specific components are not included in our financial statements or notes.


AGRIUM INC.
Supplemental Information 7
Reconciliation of Selected Additional and Non-IFRS Financial Measures
(Millions of U.S. dollars, unless stated otherwise)
(Unaudited)

		Rolling four quarters ended March 31,
		2014			2013
		Retail - North America	Retail	Consolidated Agrium	Retail - North America	Retail	Consolidated Agrium
EBIT less income taxes
	EBIT	882	722	1,444	646	671	2,199
	Income taxes	238	195	390	181	188	613
		644	527	1,054	465	483	1,586
Average operating capital employed
	Average non-cash working capital	1,695	2,263	2,521	1,596	2,272	2,540
	Average property, plant and equipment	783	905	4,615	621	741	3,284
	Average investments in associates and joint ventures	32	78	630	24	85	621
	Average other assets	6	14	110	5	19	58
		2,516	3,260	7,876	2,246	3,117	6,503
Return on operating capital employed (%)		26	16	13	21	15	24
Average capital employed
	Average operating capital employed	2,516	3,260	7,876	2,246	3,117	6,503
	Average intangibles	588	660	687	492	576	631
	Average goodwill	1,777	2,043	2,109	1,805	2,228	2,323
		4,881	5,963	10,672	4,543	5,921	9,457
Return on capital employed (%)		13	9	10	10	8	17

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