Agrium Inc. (AGU) recorded net earnings of $158 million or $1.00 per share in the fourth quarter of 2010, missing the Zacks Consensus Estimates by 13 cents per share. However, it exceeded the prior-year profit of $30 million or 19 cents per share. Including one-time charges, Agrium recorded net earnings of $175 million or $1.10 per share in the fourth quarter of 2010.
In fiscal year 2010, Agrium posted net earnings of $714 million or $4.52 per share ($731-million and $4.63 diluted earnings per share from continuing operations basis) versus net earnings of $366 million ($2.33 diluted earnings per share) in fiscal 2009.
Revenues in the quarter rose 62.7% year over year to $2.3 billion, which was above the Zacks Consensus Estimates of $1.9 billion. The company’s gross profit increased by $344 million to $727 million, primarily due to higher gross profit across all major products.
In fiscal year 2010, revenues surged 15.2% year over year to $10.7 billion.
Segmental Performance
Retail: The segment’s net sales for the quarter was $1.3 billion, up $587 million from the comparable year-ago quarter.
Crop Nutrient net sales jumped significantly 91.9% year over year to $827 million driven by a combination of higher nutrient sales prices and volumes. Gross profit for crop nutrients more than doubled to $140 million due to early harvest and favorable weather conditions, particularly for potash and phosphate products.
Crop protection products’ net sales increased 21% to $291 million, primarily due to a result of net sales from newly acquired Australian and South American retail centres and increased grower and dealer demand in North America. Crop protection product margins inched up $20.0 million to $118 million.
Net sales for seed and services surged over three times from the last year’s fourth quarter to $54 million. Gross profit increased $26 million compared with the fourth quarter of 2009 gross profit of $15 million due to stronger demand for seed, supported by robust crop prices. Application services and other net sales were $153 million, up $96 million versus the prior-year quarter.
Wholesale: The wholesale segment posted strong net sales of $1.1 billion in the quarter, an increase of 54% from the comparable quarter last year. Wholesale delivered the highest fourth quarter ever with EBIT of $306 million, a considerable increase of 118.6% from the comparable quarter last year. The increase was attributable to combination of higher nutrient sales volumes, increased sales prices and lower potash production costs.
The cost of nitrogen products sold was higher at $215 per ton, consistent with the year-ago quarter. The natural gas price in the fouth quarter of 2010 was 3.81/MMBtu, lower than $4.27/MMBtu in the prior-year quarter.
Potash gross profit was $96 million in the fourth quarter of 2010 versus $74 million in the comparable quarter of 2009. The average realized potash sales price was $360 per ton, down from $382 per ton for the same period last year. Potash sales volume totaled 65,000 tons, up 18% from the year-ago quarter.
Phosphate gross profit was $54 million compared with $1 million in the same quarter last year. The significant improvement was due to higher realized sales prices given the tight phosphate market in the second half of 2010. Realized phosphate price was $624 per ton versus $392 per tonne for the same quarter last year.
Phosphate cost of product sold was $406 per ton, or $18 per tonne higher than the fourth quarter of 2009. The increase in cost of product sold was due to a combination of higher cost of sulphur, phosphate rock, and the impact of the higher Canadian dollar at the Canadian phosphate operation.
Advanced Technologies: Advanced Technologies’ quarterly net sales were $97 million, up from $95 million in the fourth quarter of 2009. This was due to higher prices and sales volumes for Environmentally Smart Nitrogen (“ESN”) and turf and ornamental products.
Discontinued Operations
On December 3, 2010, Agrium acquired AWB’s Commodity Management business and AWB Harvest Finance operations as a part of the AWB acquisition. On December 15, 2010, Agrium announced that Cargill Incorporated agreed to acquire a majority of these commodity management businesses.
As a result, these businesses are classified as discontinued operations. Net loss from discontinued operations in the fourth quarter of 2010 was $17 million versus zero in the same period of 2009.
Financial Position
Cash provided by operating activities was $563 million in the fourth quarter of 2010 versus $905 million in the prior-year quarter. Capital expenditure was $135 million versus $131 million in the prior-year quarter.
In fiscal year 2010, cash provided by operating activities was $575 million versus $1.4 billion in fiscal 2009. Capital expenditure was $441 million versus $313 million in the prior year.
Cash and cash equivalent at the end of December 31, 2010 was $540 million versus $933 million at the end of December 31, 2009. Long-term debt at the end of December 31, 2010 was $2.1 billion versus $1.7 billion at the end of December 31, 2009.
Zacks Recommendation
Currently, Agrium maintains a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.
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