Agrium Inc. reported a net loss of $7 million ($.04 diluted loss per share) for the first quarter ending March 31, 2010, compared with a net loss of $60 million ($.38 diluted loss per share) in the first quarter of 2009.
The 2010 first-quarter results included pre-tax losses of $68 million ($.30 per share) on gas and other hedge positions, and a $33 million pre-tax expense ($.15 per share) for stock-based compensation. Excluding these two items, net earnings were $64 million ($.41 per share) for the first quarter of 2010.
“A significant rebound in North American and international nutrient demand supported strong results for our Wholesale business. Activity in our Retail operations focused on positioning us to benefit from a very strong spring season for crop inputs. An unusually cold and wet March held U.S. growers back from fieldwork in the first quarter; however, the weather in April has been excellent and growers responded quickly by applying significant levels of crop inputs and making rapid progress in seeding the 2010 crop,” said Agrium President & CEO Mike Wilson.
“The fundamentals for agriculture and the nutrient markets continue to be robust. This year’s significant increase in acreage devoted to input intensive crops such as corn and cotton will benefit all three of our business units. Furthermore, we believe industry fundamentals will remain strong in both the short and medium-term.”
First-quarter sales were $1.85 billion, versus the year-ago $1.79 billion.
Wilson told analysts that the first quarter is typically the company’s least profitable, as it builds inventories across all three business units in preparation for the spring season. “That being said, our Wholesale business unit delivered the strongest first quarter ever from a net sales and volumes perspective, and its second best ever first quarter gross profit and EBIT.” The unit had positive EBIT of $140 million on sales of $789 million, versus the year-ago $57 million on sales of $695 million. Potash sales saw the biggest increase at $181 million, up from $42 million the previous year. Volumes soared to 534,000 mt, up from the year-ago 76,000 mt. Tons to North America were 349,000 mt, up from the year-ago 19,000 mt, while international were 185,000 mt, up from 57,000 mt.
The average potash price was $339/mt, down from $553/mt in last year’s first quarter. The North American price was down to $387/mt from the previous year’s $751/mt, while the international price was $250/mt, down from $479/mt.
Like other potash producers, Agrium said it was able to achieve half of its recent North American $30/st price increase.
Wholesale nitrogen sales were $239 million, up from 1Q09’s $229 million. Nitrogen volumes moved up to 732,000 mt from the year-ago 673,000 mt. The average first-quarter nitrogen price was $327/mt, down from the year-ago $340/mt.
Domestic urea and ammonia prices were similar to last year’s levels, while UAN prices were lower. Agrium expects second-quarter ammonia sales to increase significantly in the higher-return agricultural ammonia markets.
First-quarter overall natural gas costs were $5.21/mmBtu, versus the year-ago $5.64/mmBtu.
Wholesale phosphate sales were up slightly, at $115 million from the year-ago $113 million. Phosphate volumes were 250,000 mt, up from 202,000 mt a year ago, with the average price at $460/mt, down from $559/mt.
“The cold wet weather in March significantly impacted our first quarter results for retail products and services, pushing sales into the second quarter,” said Wilson. However, he said the weather in April was near perfect and may have been the most active on record. Retail posted a first-quarter EBIT loss of $72 million on sales of $1.06 billion, versus the year-ago loss of $94 million on sales of $1.05 billion. While crop nutrient volumes were above year-ago levels, they were below anticipated volumes due to the late start of the spring season. Crop nutrient sales for the quarter were $371 million, down from 1Q09’s $437 million. Crop protection and seeds both saw increases in the first quarter with sales of $462 million and $191 million, respectively, up from the year-ago $426 million and $148 million.
The Advanced Technology unit had a negative EBIT of
$1 million on sales of $63 million, down from the year-ago
positive $1 million on sales of $67 million. Agrium expects
strong ESN movement in the second quarter as the season
progresses, as well as the start-up of its new ESN plant in
New Madrid, Mo. (GM May 3, p. 12).
Agrium is providing guidance for the second quarter of
2010 of $2.50 to $3.00 diluted earnings per share.
As of May 5, Wilson said the Canadian grower is just getting
started with the application and seeding season, while
the U.S. grower is well on his way, with retailers trying to
catch their breath when and where they can. Wilson said he
expects both Retail and Wholesale bins to be virtually empty
at the end of the spring season, and this will be positive news
for everyone in the ag supply chain. Expectations are that
buyers will fill mid-to-late summer for the fall, and then be
empty at the end of that season.
On the phosphate side, Agrium said it has just unloaded
a phosphate rock vessel from Morocco in the Gulf, with the
product to be railed to its plant in Redwater, Alberta. This
will supplement product from the company’s Kapuskasing,
Ont., mine. Agrium is looking at 2013 as the end of that
mine’s economic life. Currently, rock from the mine has
higher aluminum levels, which has cut back production at
Redwater. The company is working on the problem in order
to get back to full rates.
Moving forward, Agrium is not deterred by its inability to
acquire CF Industries Holdings Inc., saying it is working on
a number of opportunities. Retail acquisitions remain a good
bet as the company has a goal to reach $1 billion in annual
Retail EBIT by 2014.