Agrium Inc. reported a 42 percent drop in net earnings for the second quarter ending June 30, 2009, to $370 million ($2.35 per diluted share) on sales of $4.14 billion, versus the year-ago $636 million ($4.00 per share) and $3.94 billion, respectively. EBITDA was $602 million, down from the year-ago $1.03 billion.
“Solid results from Retail, Advanced Technologies and our Wholesale nitrogen businesses resulted in Agrium achieving our second strongest quarterly net earnings in our history,” said Agrium President and CEO Mike Wilson. “We were able to do this despite the challenge of a short-term reduction in potash and phosphate application rates and Retail crop nutrient margins. The outlook for our businesses and products remains strong and we are starting to see signs of improving demand fundamentals as we approach the fall season. Our Retail crop protection and seed businesses in particular delivered excellent results and we ended the season with normal crop nutrient inventories in our retail business. We continue to anticipate a recovery in potash demand later in the second half of 2009.”
Agrium per share results of $2.35 easily beat average analyst projections of $1.83 collected in a Bloomberg survey.
An 89 percent drop in potash volumes in Agrium’s Wholesale business was a major factor for the quarterly drop, sinking to 61,000 mt from the year-ago 574,000 mt. Average potash selling prices were up, however, to $770/mt from the year-ago $425/mt.
Wholesale phosphate volumes were off 12 percent.
Nitrogen volumes remained about even with year-ago numbers, as a decline in North American numbers was offset by increased exports from Profertil. Urea and ammonia products saw a strong quarter and nitrogen contributed $182 million in gross profit, 86 percent of Wholesale’s total gross profit.
Agrium took a $32 million write-down associated with Wholesale’s resale business.
Second-quarter Wholesale gross profit was $212 million on sales of $950 million, versus the year-ago $582 million and $1.4 billion, respectively.
Retail second-quarter gross profit was $597 million on sales of $3.15 billion, compared to the year-ago $667 million and $2.5 billion. Improved Retail sales reflected last year’s acquisition of UAP Holding Corp. While crop protection and seed profits were up in this sector, crop nutrients saw a decline to $117 million, down from $335 million, though sales figures were actually up, at $1.3 billion from $1.25 billion.
Second-quarter Advanced Technology gross profit was $17 million on sales of $82 million, versus the year-ago $20 and $107 million.
Agrium reported six-month net earnings of $310 million ($1.97 per share) on sales of $5.93 billion, versus the year-ago $831 million ($5.24 per share) and $5.1 billion, respectively. EBITDA was $601 million versus the year-ago $1.38 billion. Wholesale gross profit was $329 million on sales of $1.64 billion, versus the year-ago $855 million and $2.1 billion. Retail gross profit was $739 million on sales of $4.2 billion, versus the year-ago $782 million and $2.9 billion. Advanced Technology gross profit was $27 million on sales of $149 million, versus the year-ago $37 million and $186 million, respectively.
Going into fall, Agrium told analysts that it is close to selling about half of the nitrogen and phosphate it expects to sell for fall, and noted that it recently came out with new potash postings. “I’d say that the response in general from our customer base has been if they want to get ahead of the curve, they understand that the supply chain is relatively low and needs to be re-stocked,” said Kevin Helash, Agrium vice president, marketing and distribution. As of early August, he said people are optimistic, “but they’re not ready to blow their brains out and totally load up for fall and maybe spring yet.”
Tom Warner, Agrium Retail vice president, east, said the price of NPK has come down 40-50 percent for this fall versus last spring. He likened it to buying fuel a year ago at $4 a gallon to this year at $2.25. “Historically, that’s high; by the same token it’s cheaper compared to before. So I think you’ll see them begin to put the product back on like they have in the past, because it is down significantly from this past spring and last fall, both.”
“They’re still looking for bargains,” said Ron Wilkinson, Agrium senior vice president and Wholesale president. However, he said some customers have gone ahead and pre-paid for fall. “They’re really looking towards getting back to profit this fall and they’re looking at a decent harvest. Again, it is about timing, but they’re putting the product back on.”
Agrium Retail inventories were at about 30-35 percent of fall needs for phosphate and potash as of June 30, according to Richard Gearheard, Agrium senior vice president and Retail president. He put phosphate at 65,000 tons, down from the year-ago 170,000 tons, and potash at 160,000 tons, down from 345,000 tons.
On the international market, Agrium said demand for potash is starting to come around from India, Malaysia, Indonesia, and Brazil.