Agrium Inc.’s (AGU) first-quarter 2012 adjusted (excluding one-time items other than stock-based compensation expenses) earnings of $1.03 per share exceeded the Zacks Consensus Estimate of $1.00. On a reported basis, earnings came in at 97 cents per share, down 11% from $1.09 reported in the year-ago quarter.
Revenues amounted to $3,629 million, up 23% from $2,954 million a year ago, also above the Zacks Consensus Estimate of $2,966 million. Retail business contributed to strong sales in the quarter as the onset of early spring season in North America proved advantageous for it.
Segmental Performance
Retail:The segment posted record first-quarter sales of $2.5-billion, a year-over-year jump of 35%. Favorable weather conditions within North America boosted sales of fertilizers, crop-protection products and seeds in the reported quarter. Gross profit jumped 25.6% to $427 million. The segment’s earnings from continuing operations before finance costs, income taxes, depreciation and amortization (EBITDA) increased roughly four-fold year over year to record $101 million in the quarter.
Wholesale:The wholesale segment posted net sales of $1.2 billion in the quarter, marginally below the year-ago quarter. Lower sales volumes for potash and phosphate-based nutrients due to slow demand led to the decrease in sales. Gross profit declined 12.2% to $359 million in the quarter. EBITDA decreased 12.1% to $362 million.
Advanced Technologies:Advanced Technologies’ gross profit was $21 million, up 31% from $16 million in the prior-year quarter. Though the segment faced some outage at its Carseland nitrogen facility, higher sales volumes of Environmentally Smart Nitrogen (ESN) contributed to the sales growth. EBITDA jumped 100% year-over-year to $2 million.
Acquisition
Agrium, in March 2012, entered into an agreement withViterra Inc. to acquire the majority of its Agri-products business. The purchase price is expected to be roughly $1.65 billion, including estimated working capital of $500 million.
Financial Position
Cash provided by operating activities was $662 million in the first quarter compared with $402 million at the end of the year-ago quarter. Capital expenditure stood at $215 million versus $110 million in the prior-year quarter. Cash and cash equivalent as of March 31, 2012, was $1,752 million compared with $1,346 million as of December 31, 2011.
Outlook
Excluding one-time items, Agrium forecasts earnings per share to be in the range of $5.50 and $6.10 for the first half of 2012. According to the company, historically high crop prices are giving farmers the incentive to invest in fertilizers for boosting yields. The company expects its Wholesale operations to benefit, in the second quarter, from rising nitrogen and falling North American natural gas prices.
We currently have a long-term Outperform recommendation on Agrium. The company, which competes with CF Industries Holdings Inc. (CF) and Potash Corp. of Saskatchewan Inc. (POT), maintains a Zacks #2 Rank, which translates into a short-term (1 to 3 months) Buy rating.
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