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Agrium Q4 profit declines sharply, but tops estimates

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Agrium (TSE:AGU)(NYSE:AGU) reported a 72% decline in fourth quarter earnings due to lower crop nutrient prices in its wholesale operations and weak potash sales volumes, but shares rose on Friday as profit came in slightly better than analysts were hoping for.

The Calgary, Alberta-based agriculture products supplier already warned that fourth quarter earnings from continuing operations would be at the low end of its guidance of 80 cents to $1.25 per diluted share.

Agrium posted net earnings of $99 million, or 66 cents per diluted share, compared to a net profit of $354 million, or $2.34 per share, in the fourth quarter of 2012.

Earnings from continuing operations fell to 74 cents, from $2.37 in the year-ago period.

On an adjusted basis, to exclude such items such as gains and losses related to its purchase of Viterra assets last year, earnings from continuing operations were 87 cents per share, in line with its own estimates as the Viterra acquisiton results were also excluded from the company's fourth quarter guidance released in November.

The latest results were also a penny better than the 86 cents analysts polled by Thomson Reuters were expecting.

Overall sales fell to $2.87 billion from $3.09 billion, below the $2.98 billion analysts were anticipating. Agrium said wholesale sales decreased by 24% to $963 million due to lower realized sales prices across all product lines and lower nitrogen volumes, while retail sales increased 6% to $2.1 billion.

The retail sales gain was due largely to Viterra, which accounted for $276 million in sales during the current quarter. Crop nutrient sales decreased as colder weather impacted North American sales, the company said.

"Agrium's Retail results were excellent this quarter, particularly considering the decline in nutrient prices that occurred and the compressed fall application season in the U.S.," said president and CEO Chuck Magro. 

"Retail achieved record fourth quarter results due to increased margins across almost all shelves. 

"Our Wholesale business unit, which has more direct exposure to volatility in nutrient markets, saw their results impacted by lower global prices across all nutrients. Global nitrogen and phosphate markets have firmed significantly in early 2014 in response to what we expect will be a strong spring season."

Magro said that the company's ability to delivery on retail is one of the benefits of its integrated strategy, which is why it remains confident that it will be able to deliver on its long-term targets.

Agrium last year successfully fought a proxy battle with New York hedge fund Jana Partners LLC, which had been pushing for the company to split its retail business off from its fertilizer operation.

Expenses were higher by $112 million in the fourth quarter, tied mostly to a goodwill impairment charge recorded in Australian retail operations as a result of reduced expectations for sales, gross margins and long-term growth in the region.

Shares of Agrium were up 2.8% in Toronto in early deals Friday, at C$101.38. 

Quick facts: Agrium Inc.

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TSX:AGU
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