Agrium 4Q earnings off 76 percent; Wholesale EBIT, volumes up

While Agrium Inc. reported declining net income in the fourth quarter and year ending Dec. 31, 2009, its Wholesale unit showed a 32 percent increase in improved earnings before interest and taxes (EBIT) compared to year-ago levels. Wholesale EBIT was $140 million on net sales of $716 million, compared to the year-ago $106 million and $982 million, respectively. For the year, however, Wholesale EBIT dived to $495 million from the year-ago $1.48 billion, while Wholesale sales dropped to $3 billion from the year-ago $4.7 billion.

Fourth-quarter Wholesale gross profit was $180 million, down from the year-ago $283 million. Agrium said this was due primarily to lower average selling prices for all three major nutrients. The reduction in prices year-over-year more than offset a 44 percent increase in sales volumes in the fourth quarter. They were up 35 percent, 69 percent, and 25 percent, for N, P, and K, respectively.

“The fourth quarter of 2009 saw the initial stages of recovery in the crop input sector,” said Mike Wilson, Agrium president and CEO. “We have seen increasing demand for domestic potash and a tight supply situation for nitrogen and phosphate products. Wholesale sales volumes were substantially higher this quarter across all products than the fourth quarter of last year, despite the shortened fall application season.

“We are seeing increasing signs that demand for crop nutrients and other crop inputs will be strong in the coming spring, despite some recent weakening in crop prices following the revised yield estimates from the USDA. Agrium is looking forward to a significant recovery in the crop input markets in 2010.”

Fourth-quarter net income was $30 million ($.19 per diluted share), a 76 percent drop from the year-ago $124 million ($.79 per share). Fourth-quarter results include losses of $35 million on gas and other hedging positions, and a $34 million expense in stock-based compensation. Sales were off by about $500 million, to $1.44 billion from the year-ago $1.94 billion.

For the year, Agrium net income was off 72 percent, to $366 million ($2.33 per share) on sales of $9.13 billion, versus 2008’s $1.32 billion ($8.34 per share) and $10.0 billion, respectively.

Despite the good news from the fourth-quarter Wholesale business, Agrium Retail and Advanced Technology segments were in the negative EBIT column. Retail negative EBIT was $57 million on sales of $738 million, compared to the year-ago negative $54 million and $1.02 billion. Within the Retail division, crop nutrient sales gross profit during the fourth quarter was $46 million on sales of $431 million, down from the year-ago $60 million and $631 million, respectively. Crop protection profits were off, at $98 million on sales of $234 million from the year-ago $133 million and $288 million. The seed and other services sector reported improved margins of $45 million on sales of $73 million, up from the year-ago $35 million and $103 million, respectively.

Fourth-quarter Advanced Technology EBIT was a negative $6 million on sales of $95 million, down from the year-ago positive EBIT of $6 million and sales of $76 million.

For the year, both Retail and Advanced Technology were off, but they remained in positive numbers. Retail EBIT was $163 million on sales of $6.2 billion, versus the year-ago $480 million and $5.5 billion. Retail crop nutrient gross margins were $212 million on sales of $2.52 billion, down from the year-ago $627 million and $2.72 billion. Retail crop protection margins were up for the year, at $648 million on sales of $2.64 billion, from 2008’s $576 million and $2.1 billion, respectively. The seed and other services segment of retail also saw improved results, with margins of $322 million on sales of $1 billion, up from the year-ago $223 million and $683 million. Improved crop protection and seed performance reflected Agrium’s acquisition of United Agri Products Inc.

Full-year Advanced Technology was $3 million on sales of $304 million, versus the year-ago $33 million and $352 million.

Agrium said it paid $100 million, including working capital, for 57 farm centers in the U.S. and Canada that it bought over the last several months. It said the combined annual sales for these acquisitions, which included a few independent outlets as well as approximately 33 in Canada and some from Agriliance LLC, is projected to be $350 million.

Agrium said it continues to be fully committed in its pursuit of CF Industries Holdings Inc.

* Net sales and gross profits in $ millions, volumes in 000 mt, price is average selling price per mt. Purchased product is for resale.