Wholesale performance drives AgriumÆs fourth quarter – Alert
Agrium Inc. on Feb. 9 reported fourth-quarter net earnings from continuing operations of $200 million ($1.45 diluted earnings per share), compared with $70 million ($0.46 diluted earnings per share) in the fourth quarter of 2014. Agrium said the increased net earnings were driven by strong performance of its Wholesale business unit, which achieved reduced cost of production and higher overall sales volumes for all three nutrients.
Retail’s fourth quarter earnings were also higher than last year, despite wet weather in the U.S. during the fall application season. On an annual basis, 2015 net earnings from continuing operations were $988 million ($6.98 diluted earnings per share), compared with $798 million ($5.51 diluted earnings per share) in 2014.
"Agrium achieved a strong finish to 2015, despite lower nutrient prices and challenging commodity markets,” said Chuck Magro, Agrium president and CEO. “A key differentiator for the company was our integrated strategy, which helped provide stability in our earnings. We also benefited from the proactive steps we took to further strengthen the company over the past year, including a renewed focus on execution and controlling our controllables. These benefits flowed through to our bottom line, helped us to generate $8.59 of free cash flow per share and drive increased returns to shareholders, while still investing in future earnings growth.”
Wholesale fourth-quarter adjusted EBITDA was reported at $372 million, which Agrium said demonstrated improved utilization rates in its nitrogen and potash segments and higher overall Wholesale sales volumes. Realized selling prices in the segment decreased, however, as a result of weaker market conditions. Agrium also reported that Wholesale’s gross profit significantly increased due to manufacturing cost efficiencies associated with higher production volumes, reduced overall fixed costs, and lower natural gas input costs for the fourth quarter compared to the same periods last year.
Retail EBITDA was higher than the same quarter last year as a result of strong year-end rebates for crop protection products and seed as well as lower operating expenses as a result of cost reduction initiatives implemented in 2015. Retail’s sales and gross profit decreased for the fourth quarter compared to the same period last year, however, primarily due to unfavorable weather conditions and the closure of one of Agrium’s livestock export businesses in Australia. Agrium said the decrease in gross profit was partially offset by higher rebates received in the fourth quarter of 2015.
"Nutrient prices have been under pressure globally, but we are optimistic we will see a strong spring application season across North America,” said Magro. “We remain focused on operational excellence and our growth strategy, controlling what we can in order to reduce our cost position, while continuing to optimize and grow our more stable Retail operations.”
Agrium announced a 2016 annual guidance range of $5.50 to $7.00 diluted earnings per share. The macroeconomic environment continues to be challenging for commodities, the company said, resulting in many commodities trading at multi-year lows in early 2016. Agrium noted that crop nutrient prices have declined over the past few months, citing lower-than-expected fall applications that left fertilizer inventories at higher-than-expected levels throughout the supply chain.
“The combination of expected increase in U.S. corn acreage and the poor fall application season is anticipated to result in strong U.S. crop nutrient demand in the first half of 2016,” Agrium said. “Based on expected crop acreage, North American crop nutrient demand is expected to increase by 1 to 3 percent in 2015/16, but phosphate and potash demand may fall below that range as volumes lost due to the poor fall season may