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Agrium Misses Estimates in 1Q

Zacks Equity Research

Agrium Inc.'s (AGU) first-quarter 2013 earnings of 94 cents missed the Zacks Consensus Estimate of $1.07 and were below 97 cents earned in the year ago quarter. Profit dipped 9% year over year to $141 million, hurt by lower sales.

Revenues fell roughly 9.7% year over year to $3,224 million in the reported quarter, also missing the Zacks Consensus Estimate of $3,491 million. Lower sales in the Retail segment led to the decline in sales.

Segment Highlights

Revenues from the Retail segment decreased 13% year over year to $2.1 billion in the reported quarter due to colder weather and a more typical spring season compared with the prior year quarter. Gross profit fell 11.9% year over year to $376 million. Despite delay in the start of spring season the segment achieved earnings before Interest, taxes, depreciation and amortization (:EBITDA) of $25 million, matching the second highest first quarter EBITDA recorded a year ago.

The Wholesale segment sales fell slightly to $1.1 billion from $1.2 billion in the previous year quarter. The segment’s EBITDA of $375 million represented the second highest EBITDA for a first quarter and increased from $363 million in prior year quarter. Higher sales volumes and margins for nitrogen and strong volumes for potash supported the strong results.

Revenues from the Advanced Technologies division were almost at par with the year ago quarter at $133 million. EBITDA shot up three-fold year over year to $6 million due to strong Environmentally Smart Nitrogen ("ESN") volumes and margins.

Financial Position

Agrium’s cash and cash equivalents stood at $585 million as of Mar 31, 2013, compared with $1,752 million as of Mar 31, 2012. Long-term debt was $2,078 million as of Mar 31, 2013, compared with $2,074 million as of Mar 31, 2012.


Agrium entered into an agreement to acquire certain agri-products assets of Viterra from Glencore (Glencore acquired Viterra in Dec 2012) for a purchase consideration of C$1.775-billion, including Viterra's 34% interest in a nitrogen facility located in Medicine Hat. The acquisition is subject to regulatory approval which Agrium expects to obtain late in the second quarter or early in the third quarter of 2013.


Moving ahead, Agrium expects strong demand for crop inputs in 2013 as farmers seek to increase crop yields through utilizing top seed genetics, crop protection products, and crop nutrients. Demand for crop protection products, primarily fungicides, is expected to improve in 2013 under more normal growing conditions. Agrium believes that farmers will continue to seek high-quality products, services, and expertise to boost yield and productivity in coming years.

Agrium, which is among the prominent fertilizer companies along with CF Industries Holdings Inc. (CF), Mosaic (MOS) and Potash Corp. of Saskatchewan Inc. (POT), stands to gain from rising crop prices and overall strong fundamentals for the agriculture and crop input market.

Agrium currently retains a Zacks Rank #4 (Sell).

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