Agrium Q3 Profit Declines On Costs, Provides Weak Outlook

(RTTNews) - Canadian fertilizer and agricultural products distributor Agrium, Inc. (AGU, AGU.TO) reported Tuesday a profit for the third quarter that declined 53 percent from last year, mainly reflecting lower gross margins amid higher costs. Adjusted earnings per share came in below analysts' expectations, while quarterly revenues topped their estimates. The company also provided earnings guidance for the fourth quarter, well below Street view.

In early October, the company announced the promotion of Chief Operating Officer Chuck Magro to succeed the retiring Mike Wilson as its new chief executive officer, effective December 31.

At the same time, the company also announced the completion of its acquisition of the Canadian and Australian retail assets of Canada's biggest grain handler Viterra, Inc. (VT.TO, VTA.AX) from Swiss commodities trader and miner Glencore Xstrata Plc (GLEN.L, GLNCY, GLCNF).

"Agrium's Retail business unit had one of its strongest third quarters on record, with EBITDA(2) of $147-million. This was driven largely by high usage of crop protection products and related application services in our North American market. The late growing season in North America, combined with uncertainty in the fertilizer markets caused many customers to delay crop nutrient purchases," Wilson said in a statement.

The Calgary, Canada-based company reported net earnings of $76 million or $0.52 per share for the third quarter, lower than $129 million or $0.80 per share in the prior-year quarter.

Excluding items, adjusted net earnings for the latest quarter would have been $73 million or $0.50 per share. On average, 22 analysts polled by Thomson Reuters expected the company to report earnings of $0.57 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 1 percent to $2.87 billion from $2.83 billion in the same quarter last year. Eighteen Wall Street analysts had consensus revenue estimate of $2.82 billion for the quarter.

On a segmental basis, retail net sales for the quarter increased 15 percent to $2.11 billion from the prior-year quarter, primarily as there was a return to a more regular seasonal crop input demand and the contribution from the recently acquired Retail locations.

Wholesale segment net sales declined 24 percent to $752 million from last year, mainly due to lower realized sales prices across all products, and plant outages.

Advanced Technologies net sales decreased 14 percent to $108 million, reflecting lower Environmentally Smart Nitrogen volumes and sales prices as a result of the soft urea market.

Total gross profit declined 13 percent to $641 million from $739 million a year ago, and gross margin contracted 400 basis points to 22 percent from last year.

Looking ahead to the fourth quarter, Agrium expects earnings in a broad range of $0.80 to $1.25 per share, while analysts are looking for earnings of $1.51 per share.

"Additionally, unplanned lost production due to outages at our Redwater and Carseland facilities reduced product availability in the third quarter and will impact fourth quarter sales volumes. This is expected to impact fourth quarter earnings by approximately $0.20 per share," Wilson added.

AGU closed Tuesday's regular trading session at $87.27, down $1.34 or 1.51% on a volume of 1.05 million shares. AGU.TO closed on the Toronto Stock Exchange at C$91.32, down C$0.95 or 1.03% on a volume of 0.54 million shares.