Agrium delivers second highest quarterly earnings; sees strengthening fundamentals
04.08.2010 | Marketwired
CALGARY, ALBERTA -- (Marketwire) -- 08/04/10 -- ALL AMOUNTS ARE STATED IN U.S.$
Agrium Inc. (TSX: AGU) (NYSE: AGU) announced today its second highest quarterly net earnings of $506-million ($3.20 diluted earnings per share) for the second quarter of 2010.
'Agrium delivered excellent second quarter results, the second highest in our history. This was particularly impressive given the record level of un-seeded acreage in Western Canada and excessive moisture conditions in the U.S. Corn Belt in late spring,' said Agrium President & CEO Mike Wilson. 'The second quarter started at a hectic pace, resulting in U.S. plantings being well ahead of historical averages in April, however May and June saw excessive wet conditions across much of North America, with seeding and application levels adversely impacted. Agrium's significant breadth and depth in our geographic and product offerings allowed us to offset these challenges and provide excellent returns,' continued Mr. Wilson.
'Global grain prices have risen considerably over the past month, on concerns over drought conditions in Europe and Russia and significantly lower acreage in Western Canada. Furthermore, U.S. corn ending inventories have been revised downward twice so far this year. Strong agricultural fundamentals should support the outlook for all crop inputs in the second half of 2010. Nitrogen and phosphate markets have also strengthened over the past month. We anticipate North American crop nutrient demand to be strong in the second half at both the grower and retail level, due to firming crop prices, weather induced constraints on nutrient application this spring, an anticipated increase in U.S. corn acreage next year and the current low inventory level of crop nutrients in the U.S. retail system. Agrium will continue to position itself strategically to capture these robust fundamentals by growing all business units along the agricultural value chain. In July 2010, we announced further retail growth in Argentina with the acquisition of 24 farm centers and a chemical formulation plant in that country,' added Mr. Wilson.
The 2010 second quarter results included a pre-tax recovery of $57-million ($0.26 diluted earnings per share)(1) on stock-based compensation(2) and pre-tax gains of $8-million ($0.04 diluted earnings per share)(1) on natural gas and other hedge positions.
Consistent with our past practice, we intend to provide earnings guidance for the second half of the year when we release our third quarter results.
(1) Second quarter effective tax rate of 28 percent used for adjusted diluted earnings per share calculations.
(2) In comparison to second quarter guidance assumptions, actual stock-based compensation recovery was $39-million ($0.18 diluted earnings per share) higher than assumed. In addition, guidance assumptions excluded mark-to-market gains/losses on non-qualifying commodity hedge positions.
MANAGEMENT'S DISCUSSION AND ANALYSIS
August 4, 2010
The following interim management's discussion and analysis (MD&A) updates our annual MD&A included in our 2009 Annual Report to Shareholders, to which our readers are referred and is as of August 4, 2010. The Board of Directors carries out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews, and prior to publication, approves, pursuant to the authority delegated to it by the Board of Directors, this disclosure. No update is provided where an item is not material or there has been no material change from the discussion in our annual MD&A. Forward-Looking Statements are outlined after the Outlook, Key Risks and Uncertainties section of this press release.
2010 Second Quarter Operating Results
NET EARNINGS
Agrium's second quarter consolidated net earnings were $506-million, or $3.20 diluted earnings per share, compared to net earnings of $370-million, or $2.35 diluted earnings per share, for the same quarter of 2009. Consolidated net earnings for the first half of 2010 were $499-million, or $3.16 diluted earnings per share, compared to $310-million, or $1.97 diluted earnings per share, for the same period last year.
Financial Overview
Three months ended June 30 Six months ended June 30
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(Millions of U.S.
dollars, except per
share amounts and
effective tax rate) 2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
Net sales 4,367 4,090 277 6,165 5,843 322
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Gross profit 1,063 890 173 1,424 1,163 261
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Expenses 331 347 (16) 712 676 36
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Net earnings before
interest expense
and income taxes
('EBIT')(a) 732 543 189 711 487 224
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Net earnings 506 370 136 499 310 189
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Diluted earnings
per share 3.20 2.35 0.85 3.16 1.97 1.19
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Effective tax rate 28% 28% - 24% 28% (4%)
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(a) A reconciliation of EBIT to net earnings is provided in the section
'Non-GAAP Measures'.
Our consolidated gross profit and EBIT for the second quarter and first half of 2010 both increased versus the corresponding periods of 2009 primarily due to higher Retail crop nutrient gross profit and Wholesale potash sales volumes. For discussion on the performance of each business unit, see section 'Business Segment Performance'.
Expenses were $16-million lower in the second quarter of 2010 compared to the same period last year largely due to a $57-million increase in other income. This increase was primarily driven by a recovery in stock-based compensation, partially offset by a $38-million increase in selling expense primarily for Retail.
Expenses were $36-million higher in the first half of 2010 compared to the same period last year largely due to a combination of the following items:
- $48-million increase in selling, general and administrative expenses, primarily for Retail;
- $20-million unfavourable change in potash profit taxes; and
- $6-million decrease in earnings from equity investees.
These were partially offset by a $40-million reduction in other expenses, primarily driven by a recovery in stock-based compensation.
Below is a summary of our other expense (income) for the second quarter and first half of 2010 and 2009:
Three months ended Six months ended
June 30, June 30,
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(Millions of U.S. dollars) 2010 2009 2010 2009
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Stock-based compensation (57) 4 (24) 14
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Realized loss on derivative
financial instruments 21 35 28 76
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Unrealized (gain) loss on
derivative financial
instruments (29) (50) 32 (22)
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Acquisition costs - - 45 -
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Gain on disposal of marketable
securities - - (52) -
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Environmental remediation and
accretion of asset
retirement obligations 4 (5) 2 1
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Interest income (13) (17) (21) (29)
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Foreign exchange loss (gain) (10) 5 (6) 11
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Bad debt expense 18 14 24 19
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Other (6) (1) (4) (6)
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(72) (15) 24 64
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There was no significant change in effective tax rate for the second quarter of 2010 compared to the same period of 2009. The 4 percent decrease in the effective tax rate for the first half of 2010 versus the first half of 2009 was primarily due to the recognition of a previously unrecognized tax benefit.
BUSINESS SEGMENT PEFORMANCE
Retail
Retail's 2010 second quarter net sales were $3.3-billion, which was 6 percent higher than the $3.1-billion in the second quarter of 2009. Gross profit was $719-million in the second quarter of 2010, compared to $597-million for the same period last year. Retail EBIT was $360-million in the second quarter of 2010, versus EBIT of $283-million in the second quarter of 2009. The 27 percent improvement in the second quarter EBIT for Retail is due to increased farmer demand for agricultural inputs resulting from a return to more normalized application levels by growers and significantly higher crop nutrient margins. EBIT from Retail was the second highest on record and could have been stronger if not for the extremely wet conditions experienced in the Corn Belt and Western Canada during May and June.
Crop nutrients net sales reached $1.4-billion this quarter, $83-million higher than the same period last year. The increase was primarily due to a 31 percent increase in crop nutrient sales volumes, partly offset by lower nutrient prices. Gross profit was $252-million this quarter compared to $117-million in the second quarter of 2009. Crop nutrient margins averaged 18 percent in the second quarter of 2010, compared to 9 percent in the second quarter of 2009. The increase in margins was due to a return to a more normal cost of inventory position in 2010 compared to the previous year. Sales volumes and margin dollars in our South American operations were also significantly higher than the second quarter last year due to a return to more normal moisture conditions following the extreme drought in 2009. We anticipate strong North American sales volumes in the second half of 2010 due to a solid fall application season as a result of strengthening crop prices, a continued recovery in application rates after under-application of nutrients over the past couple of years and the potential for an early harvest this year which could lengthen the fall application season.(1)
(1) See disclosure in the section 'Outlook, Key Risks and Uncertainties' in our 2010 second quarter MD&A and additional assumptions in the section 'Management's Discussion and Analysis'.
Crop protection net sales were $1.2-billion in the second quarter of 2010, largely unchanged from the same period last year. Gross profit was $274-million, down $30-million from the second quarter of 2009. The gross profit decline was primarily due to competitive market conditions, lower glyphosate prices, and pre-season fungicide sales at reduced prices. Crop protection product margins as a percentage of net sales were 22 percent for the second quarter of 2010, as compared to 25 percent for the same period last year.
Net sales of seed rose 11 percent to reach $588-million in the second quarter of 2010. The increase in net sales was due to higher seeded acreage for cotton, soybean, and corn in 2010. Gross profit for seed was $106-million, largely unchanged from the same quarter last year. Gross margin as a percentage of net sales was 18 percent this quarter, versus 20 percent for the same period in 2009 due to a more competitive seed pricing environment between suppliers this year and lower supplier prepay discounts than last year.
Application services and other net sales were $122-million for the second quarter of 2010, a $23-million increase from the same period in 2009. Gross profit for the quarter increased to $87-million, versus $72-million in 2009. This net sales and gross profit increase was due to higher sales of applied nutrients and chemicals.
Retail selling expenses for the second quarter of 2010 were $304-million, an 11 percent increase over last year's level, primarily due to higher performance incentives and equipment expenses. The incentives were related to higher earnings and the equipment expenses were consistent with the increased application acres. Selling expenses as a percentage of net sales in the second quarter of 2010 remained similar to the same period last year.
Wholesale
Wholesale EBIT for the quarter was $285-million, a 33 percent increase over the same period in 2009, and the second highest EBIT on record for this period. Wholesale's net sales were $1-billion for the second quarter of 2010 compared to $950-million for the second quarter of 2009. Gross profit was $274-million in the second quarter of 2010, a $62-million increase from the second quarter of 2009 and similar to the gross profit achieved in 2007. The key factors impacting these strong results included the dramatic return in potash demand in both domestic and international markets and higher purchase for resale sales margins and volumes which more than offset lower nitrogen profit.
Nitrogen gross profit was $140-million this quarter, compared to $182-million in the same quarter last year. Nitrogen realized sales prices were slightly lower in the second quarter of 2010 when compared to 2009 due in part to lower realized ammonia prices and as a result of extremely wet weather in our key Western Canadian market. Although benchmark ammonia prices were higher than the same period last year, realized ammonia prices were lower as 2009 prices benefited from forward sales made in late 2008 at relatively high prices. In addition, the wet weather in Western Canada this spring resulted in a lower proportion of our second quarter ammonia sales to Western Canada. Urea realized sales prices were slightly higher than the same quarter last year due to stronger market fundamentals. Nitrogen sales volumes increased slightly when compared to the same period last year, with higher ammonia and UAN sales volumes, offset partially by lower domestic and international urea sales. Nitrogen cost of product sold was $243 per tonne this quarter versus $227 per tonne last year. The higher cost of product sold per tonne in 2010 is primarily due to higher natural gas costs in the current year and the impact of repair and maintenance activities associated with our June Fort Saskatchewan turnaround. Nitrogen margins averaged $111 per tonne this quarter, compared with $146 per tonne in the second quarter of last year. Ammonia margins were lower than the same quarter last year while urea margins were similar to last year.
Overall natural gas cost was $4.69/MMBtu in the second quarter of 2010 versus $4.59/MMBtu in the second quarter of 2009, including realized hedging losses of $20-million for the second quarter of 2010 (or $0.78/MMBtu). The U.S. benchmark (NYMEX) natural gas price for the second quarter of 2010 was $4.07/MMBtu, versus $3.60/MMBtu in the same quarter last year and $5.38/MMBtu in the first quarter of 2010. The AECO (Alberta) basis differential was a $0.29/MMBtu discount to NYMEX for the second quarter of 2010.
Phosphate gross profit was $10-million, compared to $12-million for the same quarter last year. Sales volumes were 7 percent lower than the same quarter last year due to record Western Canadian crop land left un-seeded as a result of the extremely wet conditions this spring. Realized sales prices averaged $510 per tonne this quarter, up 12 percent over the same period last year, due to tight North American inventories resulting from improved demand in North America and globally. Phosphate cost of product sold increased $61 per tonne to $469 per tonne compared to the second quarter of 2009, due to higher rock and sulphur costs and the impact of repair and maintenance activities associated with our June turnaround at our Conda plant. Conda's 2009 turnaround was executed in the third quarter. Gross margin for phosphate was $41 per tonne compared with $46 per tonne in the second quarter of 2009.
Potash gross profit was $110-million versus $23-million in the second quarter of 2009. The substantial increase in profit was due to the significant turnaround in demand in both domestic and international markets in 2010, which more than offset lower sales prices this year. Sales volumes were 529,000 tonnes this quarter, compared to only 61,000 tonnes for the same quarter last year. The cost of product sold was $147 per tonne this quarter, down significantly from the $393 per tonne in the second quarter of 2009. The reduction in per tonne costs was due to the Vanscoy mine running at close to capacity for the second consecutive quarter in 2010. Gross margin on a per tonne basis was $208 this quarter, down from the $377 in the second quarter of last year.
Purchase for resale gross profit for the second quarter of 2010 was $4-million, compared to a loss of $28-million in the same period of 2009. Sales volumes increased to 759,000 tonnes from 681,000 tonnes in 2009 and average gross margin per tonne showed a significant improvement of $46 per tonne from the previous year, since we did not carry high cost inventories in 2010 as was the case in 2009.
Wholesale expenses were $8-million lower in the second quarter of 2010 than for the same period last year. The lower expenses were due primarily to lower potash profit and capital taxes and a recovery in stock-based compensation. This was partly offset by an increase in year-over-year net realized and mark-to-market derivative losses and a reduction in equity earnings from our 26 percent Egyptian investment due to a retroactive change in tax status. The Egyptian government imposed a tax rate of 20 percent on earnings, resulting in a $7-million charge this quarter.
Advanced Technologies
Advanced Technologies' second quarter 2010 net sales were $138-million compared to $82-million in the second quarter of 2009. Gross profit of $31-million was $14-million higher versus the same period last year. The increase in both net sales and gross profit was partly due to the transfer of Agrium's Retail turf and ornamental business in late 2009, which contributed $8-million of gross profit in the current quarter. Environmentally Smart Nitrogen ('ESN') sales were significantly higher as well, contributing an additional $4-million in gross profit when compared to the second quarter of 2009. Both the turf and ornamental and agricultural product segments experienced improved product demand and enhanced profitability versus 2009 as a result of the recovery in North American spring nutrient applications.
EBITDA was $20-million, an increase of $8-million versus the comparable period in 2009. The increase in EBITDA was driven by higher sales volumes and related gross profit, partially offset by $6-million in increased selling costs in the period, related to the inclusion of the turf and ornamental business transferred from Retail in 2009.
Other
EBIT for our Other non-operating business unit for the second quarter of 2010 was $72-million, an increase of $35-million compared to $37-million for the second quarter of 2009. The increase was primarily due to a recovery in stock-based compensation, partially offset by lower elimination of gross profit. Although Retail sales of Wholesale products to external customers was greater in the second quarter of 2010 versus the same period of 2009, the cost of the inventory was lower, resulting in a lower elimination in the second quarter of 2010.
EBIT for Other for the first half of 2010 was a loss of $16-million, a decrease of $33-million compared to earnings of $17-million for the same period of 2009. The decrease reflected the deferral of gross profit on Wholesale products sold to Retail that have yet to be sold to external customers and the expensing of costs related to the CF acquisition incurred in 2009. The decrease in EBIT was partially offset by gains realized from the sale of 1.2 million CF shares (see discussion under 'Business Acquisition') and a recovery in stock-based compensation driven by a decrease in our share price during the first half of 2010.
FINANCIAL CONDITION
The following are changes to working capital on our Consolidated Balance Sheets in the six-month period ended June 30, 2010.
As at
(Millions of June 30, December 31, Explanation of the change in
U.S. dollars) 2010 2009 Change balance
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Current assets
See discussion under the
Cash and cash Section 'Liquidity and Capital
equivalents 805 933 (128) Resources'.
Increased sales activities
during the spring and higher
Accounts Retail vendor rebates
receivable 2,475 1,324 1,151 receivable.
Inventory draw-down due to
increased sales activities
during the spring and
Inventories 1,789 2,137 (348) decreased cost of inventory.
Drawdown of prepaid inventory
due to increased sales
activities in the spring, and
expensing CF acquisition costs
related to the termination of
Prepaid the CF offer in Q1'10 (see
expenses and discussion under the section
deposits 85 612 (527) 'Business Acquisition').
Sale of CF shares in Q1'10.
See discussion under the
Marketable section 'Business
securities 4 114 (110) Acquisition'.
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Current
liabilities
Increased working capital
needs for South American
Retail and Agrium Europe due
Bank to increased inventory
indebtedness 119 106 13 purchases.
Drawdown of customer
prepayments during the spring
application in Q2'10 and a
decrease in accrued current
income taxes liability.
Accounts Partially offset by increased
payable and product purchases for Retail
accrued and royalties payable to
liabilities 2,080 2,475 (395) Retail's seed vendors.
Current
portion of
long-term Debentures due February 15,
debt 125 - 125 2011.
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Working capital 2,834 2,539 295
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LIQUIDITY AND CAPITAL RESOURCES
Below is a summary of our cash provided by or used in operating, investing, and financing activities as reflected in the Consolidated Statements of Cash Flow:
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
(Millions of U.S. dollars)
2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
Cash provided by (used in)
operating activities 38 198 (160) (76) 267 (343)
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Cash (used in) provided by
investing activities (119) (108) (11) (59) (250) 191
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Cash (used in) provided by
financing activities (12) 74 (86) 13 (127) 140
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Effect of exchange rate changes
on cash (9) 1 (10) (6) 4 (10)
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(Decrease) increase in cash and
cash equivalents-end of period (102) 165 (267) (128) (106) (22)
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The sources and uses of cash for the three months ended June 30, 2010 are
summarized below:
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Cash provided by operating activities - Drivers behind the $160-million
decrease in source of cash
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Source -$318-million increase resulting from net earnings of $506-million
of cash adjusted for non-cash items, primarily associated with future
income taxes and a recovery in stock-based compensation.
Use of -$478-million increase in non-cash working capital. The increase in
cash non-cash working capital was primarily driven by higher increase
in accounts receivable and lower decreases in both inventories and
prepaid expenses and deposits in the second quarter of 2010
compared to the second quarter of 2009.
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Cash used in financing activities - Drivers behind the $86-million increase
in use of cash
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Use of -Higher bank indebtedness in Q2'09 due to higher working capital
cash needs for product purchases in Q2'09 versus pay-down of bank
indebtedness in Q2'10.
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The sources and uses of cash for the six months ended June 30, 2010 are
summarized below:
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Cash used in operating activities - Drivers behind the $343-million increase
in use of cash
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Source -$336-million increase resulting from net earnings of $499-million
of cash adjusted for non-cash items, primarily associated with unrealized
losses on both financial instruments and foreign exchange and
future income taxes.
Use of -$679-million increase in non-cash working capital. The increase in
cash non-cash working capital was primarily driven by a decrease in
accounts payable and accrued liabilities, a higher increase in
accounts receivable and a lower decrease in inventories in the
first half of 2010 compared to the first half of 2009. Partially
offset by a higher decrease in prepaid expenses and deposits in
the first half of 2010 compared to the first half of 2009.
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Cash used in investing activities - Drivers behind the $191-million decrease
in use of cash
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Source -Proceeds of $117-million received on the sale of our shares in CF
of in Q1'10 that were purchased for $65-million in Q1'09; and
cash -Proceeds of $25-million received in Q1'10 on the sale of offshore
insurance assets.
Use of -$82-million increase in capital expenditures.
cash
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Cash provided by financing activities - Drivers behind the $140-million
increase in source of cash
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Source -Pay-down of our bank indebtedness due to lower working capital
of cash needs in the first half of 2009 and removal of EAgrium bank
indebtedness in Q1'09 a result of the deconsolidation of EAgrium.
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Our bank indebtedness is summarized as follows:
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Short-term credit facilities available at
June 30, 2010 (a) Total Unutilized Utilized
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(Millions of U.S. dollars)
North American revolving credit facilities
expiring 2012(b) 775 775 -
European credit facilities expiring in 2010 to
2012(c) 180 101 79
South American credit facilities expiring 2010 to
2012 139 99 40
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1,094 975 119
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a) As of June 30, 2010, a total of $200-million was available from our
accounts receivable securitization facility. For further information, see
discussion under the section 'Off-Balance Sheet Arrangements' on page 68
of our 2009 Annual Report.
b) Outstanding letters of credit issued under the Company's revolving credit
facilities at June 30, 2010 were $73-million, reducing credit available
under the facilities to $702-million.
c) Of the total, $4-million is secured. Security pledged for the utilized
balance includes inventory, accounts receivable and other items with a
total carrying value of $4-million. The utilized balance includes Euro-
denominated debt of $22-million.
Credit Rating
Following Agrium's announcement on March 11, 2010 that it will no longer pursue an acquisition of CF, DBRS Limited removed Agrium from Under Review on March 12, 2010. On March 18, 2010, Moody's concluded its review and removed Agrium from Under Review for negative watch to Stable outlook. For further discussion on CF, see disclosure in the section 'Business Acquisition' below.
OUTSTANDING SHARE DATA
The number of outstanding shares as at July 31, 2010 was 157 million. As at July 31, 2010, there were approximately 1 million stock options outstanding and issuable assuming full conversion, where each option granted can be exercised for one common share.
SELECTED QUARTERLY INFORMATION
(Unaudited, in millions of U.S. dollars, except per share information)
2010 2009 2008
---------------------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
Net sales 4,367 1,798 1,442 1,844 4,090 1,753 1,941 3,113 3,870
Gross profit 1,063 361 383 397 890 273 522 1,048 1,261
Net earnings (loss) 506 (7) 30 26 370 (60) 124 367 636
(Loss) earnings per
share
-basic 3.21 (0.04) 0.19 0.16 2.36 (0.38) 0.79 2.32 4.03
-diluted 3.20 (0.04) 0.19 0.16 2.35 (0.38) 0.79 2.31 4.00
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The agricultural products business is seasonal in nature. Consequently, quarter-to-quarter results are not directly comparable. Sales are concentrated in the spring and fall planting seasons, while produced inventories are accumulated ahead of the application season. Cash collections generally occur after the planting seasons in North and South America.
BUSINESS ACQUISITION
On March 11, 2010, the Company announced that it would no longer pursue an acquisition of CF Industries Holdings Inc. ('CF') and allowed its offer for CF to expire on March 22, 2010. Acquisition costs of $45-million, previously recorded in prepaid expenses and deposits, were expensed on expiry of the offer. In March 2010, the Company sold its investment in CF, consisting of 1.2 million common shares, and recorded a pre-tax gain in other expenses of $52-million. Unrealized gains on the shares had previously been recorded in other comprehensive income.
Following termination of the CF offer, the conditional sale of 50 percent of the Carseland nitrogen facility to Terra Industries Inc. was also terminated.
INTERNATIONAL FINANCIAL REPORTING STANDARDS ('IFRS')
Agrium continues to work towards completing the design and development phase of the transition project. The Company's 2009 Annual Report includes a detailed description of Agrium's IFRS transition plan activities, major milestones and timelines.
The table below updates our 2009 Annual Report disclosure outlining our key IFRS project plan progress to date.
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IFRS Transition Project
Key Elements Milestones/Timelines Status
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Accounting policies: - Accounting policies - Provided draft of IFRS
- Analyze accounting and draft IFRS financial statement
policy differences financial statement format with disclosures
- Select IFRS format with disclosures to the Audit Committee
accounting policies approved by senior for review
and determine IFRS 1 management and in for - Major areas of impact
elections review to the Audit to be quantified in Q3
- Develop IFRS Committee August, 2010 disclosure
financial statement - Final quantification of
format with IFRS transition effects
appropriate for 2010 and comparative
disclosures year Q1, 2011
- Quantify IFRS impacts
on transition
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Information systems: - Information system - System testing for data
- Analyze changes solutions in place for capture complete
necessary to enable parallel reporting year - Started IFRS data
recording/tracking/ for all applicable GAAP, capture in the financial
reporting of financial 2010 systems
information required - Parallel GAAP
under all applicable consolidated reporting
GAAP for the parallel process testing is
reporting year(s) continuing
- Develop and implement
solution
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Business impacts: - Applicable negotiation - Analysis of income tax
- Analysis of business of covenants and impacts completed
activities that may compensation - Continuing to identify
be impacted by GAAP arrangements by end of tax impacts as plan
measures, such as debt 2010 progresses
covenants and - Identification of
compensation and significant tax impacts
identification of August, 2010
solutions where
necessary
- Analysis of tax
impacts on transition
to IFRS
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Following below are the standards that may have significant impact on Agrium's consolidated financial statements. This is not an exhaustive listing of changes on transition to IFRS. Detailed analysis and quantification of these changes is continuing and approval of accounting policies is expected in 2010. Agrium does not expect a significant impact to its business activities nor to its operating cash flows from the transition to IFRS.
Significant Differences Between IFRS and Canadian
GAAP Estimated Impact
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Employee Benefits
Agrium expects to use an optional exemption to Transition date impact:
recognize all cumulative actuarial gains reduction of
and losses through its opening shareholders' equity and
retained earnings on transition date. an increase in pension
liabilities by the
unrecognized actuarial
gains and losses as at
transition date
Future impact: not
significant
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Share-based payments
IFRS requires cash-settled, share-based awards Transition date: reduction
to be measured at fair value, while Canadian GAAP in shareholders' equity
allows these awards to be measured at and an increase in
intrinsic value. In addition, Agrium currently liabilities
uses straight line depreciation to recognize
graded vesting stock based instruments, while Future impact: a continued
IFRS requires that each installment be accounted measurement difference
for as a separate arrangement. between the intrinsic
value and the fair value
of share based awards
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Income Taxes
Classification of future income taxes under IFRS Transition date:
is non-current whereas Canadian GAAP splits reclassifying all
future income taxes between current and non- future income taxes to
current components. non-current is expected to
result in a decrease
in current assets and a
decrease in non-current
income tax liabilities
Future impact: remains a
classification difference
Transition date:
Increase in deferred tax
liabilities and a
IFRS requires recognition of the deferred tax corresponding decrease in
impact for temporary differences arising on retained earnings
translation of certain non-monetary assets or
liabilities. Canadian GAAP does not allow similar Future impact: analysis is
treatment. ongoing
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Foreign Exchange
Agrium expects to use an optional exemption that Transition date:
permits a first time adopter to not comply with reclassification from
the requirements for cumulative translation accumulated other
differences that existed at the date of comprehensive income to
transition to IFRS. If this exemption retained earnings; no
is elected Agrium is permitted to deem all impact to shareholders'
cumulative translation differences for all equity
foreign operations to be nil
at transition. Future impact: none
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Provisions
IFRS requires discounting of provisions where the Transition date:
effect of the discounting is material. Provisions decrease in
are not discounted under Canadian GAAP unless environmental liabilities
specifically required or when a provision is and a corresponding
required to be measured at fair value. increase to retained
earnings
Future impact: each period
there will be a charge to
earnings for accretion of
discount
Transition date:
The specific provisions for asset retirement Increase to asset
obligations under IFRS are measured based retirement
on management's best estimate. The obligations and a
discount rate used in calculating the present corresponding
value of the cash flow estimates is to be decrease to retained
based on risks specific to the liability unless earnings
these risks have been incorporated into the cash
flow estimates. Canadian GAAP measures Future impact: decrease in
asset retirement obligations at fair value charge to earnings each
incorporating market assumptions. The discount period for accretion of
rate used is a credit- adjusted risk-free rate. discount
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Decommissioning Liabilities
Agrium expects to use an optional exemption to Transition date: increase
measure any decommissioning liabilities and the to the asset base to which
related depreciation effects at the the decommissioning
date of transition to IFRS. liabilities relate,
offset to retained
earnings
Future impact: increased
asset base will result in
higher charges to
earnings for depreciation
over remaining useful life
of assets
----------------------------------------------------------------------------
NON-GAAP MEASURES
In the discussion of our performance for the quarter, in addition to the primary measures of earnings and earnings per share, we make reference to EBIT (net earnings before interest expense and income taxes) and EBITDA (net earnings before interest expense, income taxes, depreciation, amortization and asset impairment). We consider EBIT and EBITDA to be useful measures of performance because income tax jurisdictions and business segments are not synonymous and we believe that allocation of income tax charges distorts the comparability of historical performance for the different business segments. Similarly, financing and related interest charges cannot be allocated to all business units on a basis that is meaningful for comparison with other companies.
EBIT and EBITDA are not recognized measures under GAAP, and our methods of calculation may not be comparable to other companies. Similarly, EBITDA should not be used as an alternative to cash provided by (used in) operating activities as determined in accordance with GAAP.
The following table is a reconciliation of EBITDA and EBIT to net loss as calculated in accordance with GAAP:
Three Months Ended June 30
(millions of 2010
U.S. dollars)---------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Consolidated
----------------------------------------------------------------------------
EBITDA 387 348 20 74 829
Depreciation
and amortization 27 63 5 2 97
----------------------------------------------------------------------------
EBIT 360 285 15 72 732
----------------------------------------------------------------------------
Interest expense (26)
Income taxes (200)
----------------------------------------------------------------------------
Net earnings 506
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(millions of 2009
U.S. dollars)---------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Consolidated
----------------------------------------------------------------------------
EBITDA 307 244 12 39 602
Depreciation
and amortization 24 29 4 2 59
----------------------------------------------------------------------------
EBIT 283 215 8 37 543
----------------------------------------------------------------------------
Interest expense (27)
Income taxes (146)
----------------------------------------------------------------------------
Net earnings 370
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six Months Ended June 30
(millions of 2010
U.S. dollars)---------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Consolidated
----------------------------------------------------------------------------
EBITDA 342 523 23 (12) 876
Depreciation
and amortization 54 98 9 4 165
----------------------------------------------------------------------------
EBIT 288 425 14 (16) 711
----------------------------------------------------------------------------
Interest expense (53)
Income taxes (159)
----------------------------------------------------------------------------
Net earnings 499
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(millions of 2009
U.S. dollars)---------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Consolidated
----------------------------------------------------------------------------
EBITDA 239 323 18 21 601
Depreciation
and amortization 50 51 9 4 114
----------------------------------------------------------------------------
EBIT 189 272 9 17 487
----------------------------------------------------------------------------
Interest expense (58)
Income taxes (119)
----------------------------------------------------------------------------
Net earnings 310
----------------------------------------------------------------------------
----------------------------------------------------------------------------
BUSINESS RISKS
The information presented on enterprise risk management and business risks on pages 81 - 88 in our 2009 Annual Report has not changed materially since December 31, 2009.
CONTROLS & PROCEDURES
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OUTLOOK, KEY RISKS AND UNCERTAINTIES
Following several consecutive years of favourable growing conditions in most major global regions, there have been numerous crop production concerns in recent months. Russia and Europe are experiencing a drought resulting in analysts projecting a significant decline in crop production in this region. In contrast, extremely wet weather reduced seeded acreage and production in Western Canada. Though it is early in the 2010/11 marketing year, the USDA is already projecting that global grain ending stocks will decline. All of these factors have been supportive to grain and oilseed markets in recent weeks.
Indications are that the U.S. harvest is expected to be early this year as the corn development is ahead of normal due to an early planting and generally favorable crop progress. An early U.S. harvest should be favourable for all crop input applications, in particular for fall crop nutrient demand due to the potential for an extended fall application season. Furthermore, the USDA reduced its forecasts of carry-in stocks and acreage for the 2010/11 marketing year which reduced projected 2010/11 U.S. corn ending stocks by 13 percent. Analysts expect this reduction to result in an increase in corn area in 2011.
The crop protection and seed markets both experienced greater competitive pressures in the first half of 2010 than the past few years. The global glyphosate market has stabilized, while other crop protection products are expected to demonstrate an improvement in market conditions in the second half of 2010 and into 2011. Similarly, seed prices are expected to trend higher over the next year, although prices are likely to rise at a slower rate than was the case in the 2005-2008 period.
Global nitrogen markets have firmed considerably due to a combination of seasonal turnarounds in some export regions reducing supply and a significant increase in demand from markets such as India, Pakistan and Brazil. In North America, nitrogen supplies remain historically tight with urea inventories 11 percent below the five-year average at the end of June. China is in the midst of its seasonal reduction of the urea export tax to 7 percent which may act as a cap on the present market rally, although recent strength in the Chinese domestic market is leading to increases in Chinese export prices. The delayed Pardis 2 urea plant in Iran is expected to come on-stream in the third quarter. There is still uncertainty over the price Ukrainian producers will pay for natural gas in the second half of 2010. While most analysts expect the price will rise, the timing and extent of the increase is still uncertain.
North American DAP/MAP inventories in June rose 17 percent, the highest level since May of 2009 as reported by the TFI. However, international phosphate markets have firmed in recent weeks on strong global demand. Import demand from India is expected to keep exporters in a relatively comfortable position for much of the rest of the year. In addition, strong crop prices should be supportive to seasonal South American demand over the next several months and from North America later in 2010. Phosphate prices will also continue to be influenced by freight rates. The recent significant decline in dry bulk freight rates has been supportive to FOB phosphate prices. Ma'aden, in Saudi Arabia, announced that it has begun trial operations at its phosphate mine and plant. The timing of product being commercially available is uncertain, but most analysts expect it will be mid-2011 before there is a significant volume.
The potash market continues to recover from the low demand levels experienced in 2009. North American producer inventories as reported by the TFI show that North American potash inventory levels at the end of June were 34 percent lower than year-ago levels. While global demand is significantly higher than it was a year ago, it remains behind historical averages in some key regions. For example, in the first six months of 2010, Brazilian imports of potash were more than three times the comparable period of 2009, but remained about 10 percent below the 2004-2008 average. Reports indicate that Brazilian potash supplies are tight and second half 2010 imports could be significantly stronger than they were in the first half. Chinese potash imports through the end of June totaled 2.5 million tonnes relative to 1.7 million tonnes in the same period of 2009. There remains uncertainty about Chinese imports during the second half of the year, but recent flooding is reported to have reduced domestic production capabilities, potentially creating the need for increased imports.
Forward-Looking Statements
Certain statements and other information included in this press release constitute 'forward-looking information' within the meaning of applicable Canadian securities legislation or constitute 'forward-looking statements' within the meaning of applicable U.S. securities legislation (together, 'forward-looking statements'). All statements in this press release, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to, estimates, forecasts and statements as to management's expectations with respect to, among other things, business and financial prospects, financial multiples and accretion estimates, future trends, plans, strategies and objectives. Such forward-looking statements involve known and unknown risks and uncertainties as well as various assumptions and business sensitivities, including those referred to in the MD&A section of the Corporation's most recent Annual Report to Shareholders as well as those risk factors described in the Corporation's most recent Annual Information Form, which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, general economic, market and business conditions, weather conditions, crop prices, the supply and demand and price levels for our major products, governmental and regulatory requirements and actions by governmental authorities, including changes in government policy, changes in environmental, tax and other laws or regulations and the interpretation thereof and other risk factors detailed from time to time in Agrium's reports filed with securities regulators. Agrium disclaims any intention or obligation to update or revise any forward-looking statements in this press release as a result of new information or future events, except as may be required under applicable Canadian securities legislation or applicable U.S. federal securities law. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. All of the forward-looking statements contained herein are qualified by these cautionary statements and by the assumptions that are stated or inherent in such forward-looking statements. Although we believe these assumptions are reasonable, undue reliance should not be placed on these assumptions and such forward-looking statements.
OTHER
Agrium Inc. is a major Retail supplier of agricultural products and services in North and South America, a leading global Wholesale producer and marketer of all three major agricultural nutrients and the premier supplier of specialty fertilizers in North America through our Advanced Technologies business unit. Agrium's strategy is to grow across the value chain through acquisition, incremental expansion of its existing operations
and through the development, commercialization and marketing of new products and international opportunities. Our strategy places particular emphasis on growth opportunities that both increase and stabilize our earnings profile in the continuing transformation of Agrium.
A WEBSITE SIMULCAST of the 2010 2nd Quarter Conference Call will be available in a listen-only mode beginning Wednesday, August 4th at 9:30 a.m. MT (11:30 a.m. ET). Please visit the following website: www.agrium.com
AGRIUM INC.
Consolidated Statements of Operations
(Millions of U.S. dollars, except per share amounts)
(Unaudited)
Three months Six months
ended ended
June 30, June 30,
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
Sales 4,431 4,140 6,279 5,935
Direct freight 64 50 114 92
----------------------------------------------------------------------------
Net sales 4,367 4,090 6,165 5,843
Cost of product sold 3,304 3,200 4,741 4,680
----------------------------------------------------------------------------
Gross profit 1,063 890 1,424 1,163
Expenses
Selling 319 281 530 485
General and administrative 55 56 103 100
Depreciation and amortization 30 29 62 60
Potash profit and capital tax 1 7 4 (16)
Earnings from equity investees
(note 6) (2) (11) (11) (17)
Other (income) expenses (note 3) (72) (15) 24 64
----------------------------------------------------------------------------
Earnings before interest, income
taxes and non-controlling
interests 732 543 712 487
Interest on long-term debt 22 21 45 46
Other interest 4 6 8 12
----------------------------------------------------------------------------
Earnings before income taxes and
non-controlling interests 706 516 659 429
Income taxes 200 146 159 119
Non-controlling interests - - 1 -
----------------------------------------------------------------------------
Net earnings 506 370 499 310
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share (note 4)
----------------------------------------------------------------------------
Basic 3.21 2.36 3.17 1.98
Diluted 3.20 2.35 3.16 1.97
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
(Unaudited)
Three months Six months
ended ended
June 30, June 30,
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
Operating
Net earnings 506 370 499 310
Items not affecting cash
Depreciation and amortization 97 59 165 114
Earnings from equity investees (2) (11) (11) (17)
Stock-based compensation (57) 4 (24) 14
Unrealized (gain) loss on derivative
financial instruments (29) (50) 32 (22)
Acquisition costs (note 2) - - 45 -
Gain on disposal of marketable
securities (note 2) - - (52) -
Unrealized foreign exchange (gain)
loss (5) (3) 1 79
Future income taxes 22 (182) (5) (176)
Non-controlling interests - - 1 -
Other 9 50 13 40
Dividends from equity investees 14 - 14 -
Net changes in non-cash working
capital (517) (39) (754) (75)
----------------------------------------------------------------------------
Cash provided by (used in) operating
activities 38 198 (76) 267
----------------------------------------------------------------------------
Investing
Acquisitions, net of cash acquired - - - (15)
Capital expenditures (110) (56) (186) (104)
Proceeds from disposal of investments - - 25 -
Purchase of marketable securities - - - (65)
Proceeds from disposal of marketable
securities - - 117 -
Other (9) (52) (15) (66)
----------------------------------------------------------------------------
Cash used in investing activities (119) (108) (59) (250)
----------------------------------------------------------------------------
Financing
Bank indebtedness (5) 62 28 (131)
Long-term debt issued - 12 - 12
Repayment of long-term debt (7) - (8) -
Dividends paid - - (9) (9)
Shares issued, net of issuance costs - - 2 1
----------------------------------------------------------------------------
Cash (used in) provided by financing
activities (12) 74 13 (127)
----------------------------------------------------------------------------
Effect of exchange rate changes on
cash (9) 1 (6) 4
----------------------------------------------------------------------------
(Decrease) increase in cash and cash
equivalents (102) 165 (128) (106)
Cash and cash equivalents - beginning
of period 907 86 933 374
Deconsolidation of Egypt subsidiary - - - (17)
----------------------------------------------------------------------------
Cash and cash equivalents - end of
period 805 251 805 251
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Consolidated Balance Sheets
(Millions of U.S. dollars)
(Unaudited)
As at As at
June 30, December 31,
----------------------------------------------------------------------------
2010 2009 2009
----------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents 805 251 933
Accounts receivable 2,475 2,230 1,324
Inventories (note 5) 1,789 2,318 2,137
Prepaid expenses and deposits 85 322 612
Marketable securities 4 108 114
----------------------------------------------------------------------------
5,158 5,229 5,120
Property, plant and equipment 1,835 1,584 1,782
Intangibles 596 640 617
Goodwill 1,803 1,797 1,801
Investment in equity investees (note 6) 349 351 370
Other assets 54 87 95
----------------------------------------------------------------------------
9,795 9,688 9,785
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness (note 7) 119 349 106
Accounts payable and accrued liabilities 2,080 2,328 2,475
Current portion of long-term debt (note 7) 125 - -
----------------------------------------------------------------------------
2,324 2,677 2,581
Long-term debt (note 7) 1,567 1,637 1,699
Other liabilities 351 339 381
Future income tax liabilities 516 549 521
Non-controlling interests 10 13 11
----------------------------------------------------------------------------
4,768 5,215 5,193
Shareholders' equity 5,027 4,473 4,592
----------------------------------------------------------------------------
9,795 9,688 9,785
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Comprehensive Income and Shareholders' Equity
(Millions of U.S. dollars, except share data)
(Unaudited)
Millions of Share Contributed
common shares capital surplus
----------------------------------------------------------------------------
December 31, 2009 157 1,969 8
----------------------------------------------------------------------------
Net earnings
Available for sale financial
instruments (a)
Foreign currency translation
----------------------------------------------------------------------------
Comprehensive income
----------------------------------------------------------------------------
Dividends
Stock options exercised 3
----------------------------------------------------------------------------
June 30, 2010 157 1,972 8
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2008 157 1,961 8
----------------------------------------------------------------------------
Net earnings
Cash flow hedges (b)
Available for sale financial
instruments (c)
Foreign currency translation
----------------------------------------------------------------------------
Comprehensive income
----------------------------------------------------------------------------
Dividends
Stock options exercised 2
----------------------------------------------------------------------------
June 30, 2009 157 1,963 8
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated
other
comprehensive Total
Retained income shareholders'
earnings (note 8) equity
----------------------------------------------------------------------------
December 31, 2009 2,662 (47) 4,592
----------------------------------------------------------------------------
Net earnings 499 499
Available for sale financial
instruments (a) (29) (29)
Foreign currency translation (29) (29)
----------------------------------------------------------------------------
Comprehensive income 441
----------------------------------------------------------------------------
Dividends (9) (9)
Stock options exercised 3
----------------------------------------------------------------------------
June 30, 2010 3,152 (105) 5,027
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2008 2,313 (172) 4,110
----------------------------------------------------------------------------
Net earnings 310 310
Cash flow hedges (b) (2) (2)
Available for sale financial
instruments (c) 16 16
Foreign currency translation 46 46
----------------------------------------------------------------------------
Comprehensive income 370
----------------------------------------------------------------------------
Dividends (9) (9)
Stock options exercised 2
----------------------------------------------------------------------------
June 30, 2009 2,614 (112) 4,473
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Net of tax of $18-million.
(b) Net of tax of $1-million.
(c) Net of tax of $11-million.
See accompanying notes.
AGRIUM INC.
Summarized Notes to the Consolidated Financial Statements
For the six months ended June 30, 2010
(Millions of U.S. dollars, except per share amounts)
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies are in accordance with accounting principles generally accepted in Canada and are consistent with those outlined in the annual audited financial statements except where stated below. These interim consolidated financial statements do not include all disclosures normally provided in annual financial statements and should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2009. In management's opinion, the interim consolidated financial statements include all adjustments necessary to present fairly such information. The Company has evaluated events subsequent to the date the consolidated financial statements were issued.
The agricultural products business is seasonal in nature. Sales are concentrated in the spring and fall planting seasons, while produced inventories are accumulated ahead of the application season. Cash collections generally occur after the planting seasons in North and South America.
Certain comparative figures have been reclassified to conform to the current year's presentation.
2. BUSINESS ACQUISITION
CF Industries Holdings, Inc.
On March 11, 2010, the Company announced that it would no longer pursue an acquisition of CF Industries Holdings, Inc. ('CF') and allowed its offer for CF to expire on March 22, 2010. Acquisition costs of $45-million, previously recorded in prepaid expenses and deposits, were expensed on expiry of the offer. In March 2010, the Company sold its investment in CF, consisting of 1.2 million common shares, and recorded a pre-tax gain in other expenses of $52-million. Unrealized gains on the shares had previously been recorded in other comprehensive income.
3. OTHER (INCOME) EXPENSES
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
Stock-based compensation (57) 4 (24) 14
Realized loss on derivative
financial instruments 21 35 28 76
Unrealized (gain) loss on
derivative financial instruments (29) (50) 32 (22)
Acquisition costs - - 45 -
Gain on disposal of marketable
securities - - (52) -
Environmental remediation and
accretion of asset retirement
obligations 4 (5) 2 1
Interest income (13) (17) (21) (29)
Foreign exchange (gain) loss (10) 5 (6) 11
Bad debt expense 18 14 24 19
Other (6) (1) (4) (6)
----------------------------------------------------------------------------
(72) (15) 24 64
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4. EARNINGS PER SHARE
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
Numerator
Net earnings 506 370 499 310
----------------------------------------------------------------------------
Denominator
Weighted-average number of shares
outstanding for basic earnings
per share 157 157 157 157
Dilutive instruments - stock
options (a) 1 - 1 -
----------------------------------------------------------------------------
Weighted-average number of shares
outstanding for diluted
earnings per share 158 157 158 157
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic earnings per share 3.21 2.36 3.17 1.98
Diluted earnings per share 3.20 2.35 3.16 1.97
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) For diluted earnings per share, conversion or exercise is assumed only
if the effect is dilutive to basic earnings per share.
5. INVENTORIES
As at As at
June 30, December 31,
----------------------------------------------------------------------------
2010 2009 2009
----------------------------------------------------------------------------
Raw materials 256 260 231
Finished goods 244 320 338
Product for resale 1,289 1,738 1,568
----------------------------------------------------------------------------
1,789 2,318 2,137
----------------------------------------------------------------------------
----------------------------------------------------------------------------
6. INVESTMENT IN EQUITY INVESTEES
As at As at
June 30, December 31,
----------------------------------------------------------------------------
Interest 2010 2009 2009
----------------------------------------------------------------------------
Misr Fertilizers Production Company
S.A.E. ('MOPCO') a private company
operating in Egypt 26.0% 262 264 270
Hanfeng Evergreen Inc. ('Hanfeng'),
11.9 million common shares 19.5% 84 83 87
Other 3 4 13
----------------------------------------------------------------------------
349 351 370
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
Earnings from equity investees 2010 2009 2010 2009
----------------------------------------------------------------------------
MOPCO 2 10 6 14
Hanfeng - 1 1 3
Other - - 4 -
----------------------------------------------------------------------------
2 11 11 17
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at As at
June 30, December 31,
----------------------------------------------------------------------------
Cumulative undistributed earnings 2010 2009 2009
----------------------------------------------------------------------------
MOPCO 12 14 20
Hanfeng 10 7 9
Other 6 - 2
----------------------------------------------------------------------------
28 21 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets, liabilities and results of operations As at As at
of the above equity investees June 30, December 31,
----------------------------------------------------------------------------
2010 2009 2009
----------------------------------------------------------------------------
Net sales 119 213 437
Net earnings 40 72 105
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets 1,673 930 1,364
Liabilities 686 266 382
Shareholders' equity 987 664 982
----------------------------------------------------------------------------
----------------------------------------------------------------------------
7. DEBT
As at As at
June 30, December 31,
----------------------------------------------------------------------------
2010 2009
----------------------------------------------------------------------------
Total Unutilized Utilized Utilized
----------------------------------------------------------------------------
Bank indebtedness
North American revolving credit
facilities expiring 2012 (a) 775 775 - -
European credit facilities
expiring 2010 to 2012 (b) 180 101 79 74
South American credit facilities
expiring 2010 to 2012 139 99 40 32
----------------------------------------------------------------------------
1,094 975 119 106
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current portion of long-term debt
----------------------------------------------------------------------------
8.25% debentures due February 15,
2011 125 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt
----------------------------------------------------------------------------
Unsecured
Floating rate bank loans due May
5, 2013 460 460
Floating rate bank loans due 2011
to 2012 19 26
6.75% debentures due January 15,
2019 500 500
7.125% debentures due May 23, 2036 300 300
7.7% debentures due February 1,
2017 100 100
7.8% debentures due February 1,
2027 125 125
8.25% debentures due February 15,
2011 - 125
Secured
Other 73 73
----------------------------------------------------------------------------
1,577 1,709
Unamortized transaction costs (10) (10)
----------------------------------------------------------------------------
1,567 1,699
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Outstanding letters of credit issued under the Company's revolving
credit facilities at June 30, 2010 were $73-million, reducing credit
available under the facilities to $702-million.
(b) The facilities bear interest at various base rates plus a fixed or
variable margin. Of the total, $4-million is secured (December 31, 2009
- $137-million). Security pledged for the utilized balance includes
inventory, accounts receivable and other items with a total carrying
value of $4-million (December 31, 2009 - $87-million). The utilized
balance includes Euro-denominated debt of $22-million (December 31,
2009 - $31-million).
The Company has a revolving purchase and sale-agreement to sell, with limited recourse, accounts receivable to a maximum of $200-million (December 31, 2009 - $200-milion). The cumulative proceeds from securitization are nil (June 30, 2009 - $200-million).
8. ACCUMULATED OTHER COMPREHENSIVE INCOME
As at As at
June 30, December 31,
----------------------------------------------------------------------------
2010 2009 2009
----------------------------------------------------------------------------
Cash flow hedges, net of tax 2 4 2
Available for sale financial instruments, net
of tax - 16 29
Foreign currency translation (107) (132) (78)
----------------------------------------------------------------------------
(105) (112) (47)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
9. EMPLOYEE FUTURE BENEFITS
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
Defined benefit pension plans
Service cost 1 1 2 2
Interest cost 3 3 6 5
Expected return on plan assets (3) (2) (6) (4)
Net amortization and deferral 1 1 2 2
----------------------------------------------------------------------------
Net expense 2 3 4 5
----------------------------------------------------------------------------
Post-retirement benefit plans
Service cost 1 1 1 2
Interest cost 1 1 2 2
----------------------------------------------------------------------------
Net expense 2 2 3 4
----------------------------------------------------------------------------
Defined contribution pension plans 7 7 15 16
----------------------------------------------------------------------------
Total expense 11 12 22 25
----------------------------------------------------------------------------
----------------------------------------------------------------------------
10. FINANCIAL INSTRUMENTS
Risk management
In the normal course of business, the Company's financial position, results of operations and cash flows are exposed to various risks. On an annual basis, the Board approves a strategic plan that takes into account the opportunities and major risks of the Company's business and mitigation factors to reduce these risks. The Board also reviews risk management policies and procedures on an annual basis and sets upper limits on the transactional exposure to be managed and the time periods over which exposures may be managed. The Company manages risk in accordance with its Exposure Management Policy. The objective of the policy is to reduce volatility in cash flow.
Sensitivity analysis to risk is provided where the effect on net earnings or shareholders' equity could be material. Sensitivity analysis is performed by relating the reasonably possible changes in the risk variable at June 30, 2010 to financial instruments outstanding on that date while assuming all other variables remain constant.
Market risk
(a) Currency risk
U.S. dollar denominated transactions in our Canadian operations generate foreign exchange gains and losses on outstanding balances which are recognized in net earnings. The net U.S. dollar denominated balance in Canadian operations is $305-million. A $10-million impact on net earnings requires a strengthening or weakening of $0.05 in the U.S. dollar against the Canadian dollar.
Balances in non-U.S. dollar subsidiaries Canadian
(in U.S. dollar equivalent) dollars Euro
----------------------------------------------------------------------------
Cash and cash equivalents 333 11
Accounts receivable 200 66
Bank indebtedness - (79)
Accounts payable and accrued liabilities (321) (30)
----------------------------------------------------------------------------
212 (32)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
A foreign currency translation adjustment is recognized in other comprehensive income upon translation of our Canadian and European operations to U.S. dollars. A $10-million increase in comprehensive income requires a strengthening of $0.05 of the Canadian dollar or a weakening of $0.38 of the Euro against the U.S. dollar. A $10-million decrease in comprehensive income requires a weakening of $0.05 of the Canadian dollar or a strengthening of $0.20 of the Euro against the U.S. dollar.
(b) Commodity price risk
For natural gas derivative financial instruments outstanding at June 30, 2010, a $10-million increase in net earnings requires an increase of $3.70 per MMBtu. During the quarter, the Company entered into natural gas derivative financial instruments to offset the exposure on the majority of its outstanding natural gas derivative financial instruments.
(c) Interest rate risk
The Company's cash and cash equivalents include highly liquid investments with a term of three months or less that earn interest at market rates. The Company manages its interest rate risk on these investments by maximizing the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. Fluctuations in market rates of interest on cash and cash equivalents do not have a significant impact on the Company's results of operations due to the short term to maturity of the investments.
Credit risk
There were no significant uncollectible trade receivable balances at June 30, 2010.
Twelve
Six months ended months ended
Allowance for doubtful accounts June 30, December 31,
----------------------------------------------------------------------------
2010 2009 2009
----------------------------------------------------------------------------
Balance, beginning of period 46 36 36
Additions 35 23 47
Write-offs (29) (17) (37)
Balance, end of period 52 42 46
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance as a percent of trade accounts
receivable (%) 3 2 4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Company may be exposed to certain losses in the event that counterparties to short-term investments and derivative financial instruments are unable to meet their contractual obligations. The Company manages this counterparty credit risk with policies requiring that counterparties to short-term investments and derivative financial instruments have an investment grade or higher credit rating and policies that limit the investing of excess funds to liquid instruments with a maximum term of one year and limit the maximum exposure to any one counterparty. The Company also enters into master netting agreements that mitigate its exposure to counterparty credit risk. At June 30, 2010, all counterparties to derivative financial instruments have maintained an investment grade or higher credit rating and there is no indication that any counterparty will be unable to meet their obligations under derivative contracts.
Maximum credit exposure based on
derivative financial instruments in an As at As at
asset position June 30, December 31,
----------------------------------------------------------------------------
2010 2009 2009
----------------------------------------------------------------------------
Foreign exchange contracts 1 - 1
Natural gas, power and nutrient contracts 4 13 8
----------------------------------------------------------------------------
5 13 9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liquidity risk
The Company's accounts payable and accrued liabilities generally have
contractual maturities of six months or less.
Classification and fair values of financial instruments
Financial instrument Classification Carrying value
----------------------------------------------------------------------------
Cash and cash equivalents Held for trading Fair value
Accounts receivable (a) Loans and Amortized cost
receivables
Accounts receivable - derivative Held for trading Fair value
financial instruments (b)
Marketable securities Available for sale Fair value
or held for trading
Other assets Loans and Amortized cost
receivables
Other assets - derivative financial Held for trading Fair value
instruments (b)
Bank indebtedness (a) Other liabilities Amortized cost
Accounts payable and accrued Other liabilities Amortized cost
liabilities (a)
Accounts payable and accrued Held for trading Fair value
liabilities - derivative financial
instruments (b)
Long-term debt (c) Other liabilities Amortized cost
Other liabilities Other liabilities Amortized cost
Other liabilities - derivative Held for trading Fair value
financial instruments (b)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Carrying value approximates fair value due to the short-term nature of
the instruments.
(b) Fair value is recorded at the estimated amount the Company would receive
or pay to terminate the contracts.
(c) Fair value of floating-rate loans approximates carrying value.
As at As at
Long-term debt including current portion June 30, December 31,
----------------------------------------------------------------------------
2010 2009 2009
----------------------------------------------------------------------------
Fair value of long-term debt (level 2) 1,899 1,630 1,805
Carrying value of long-term debt (amortized
cost) 1,702 1,648 1,709
Weighted-average effective interest rate on
long-term debt (%) 6 6 6
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fair value of financial instruments As at June 30, 2010
----------------------------------------------------------------------------
Level 1 Level 2 Netting Total
----------------------------------------------------------------------------
Cash and cash equivalents 805 - - 805
Accounts receivable
Foreign exchange derivative
financial instruments - 1 - 1
Gas, power and nutrient derivative
financial instruments 41 4 (43) 2
Marketable securities
Other (held for trading) 4 - - 4
Other assets
Gas, power and nutrient derivative
financial instruments 23 4 (25) 2
Bank indebtedness 119 - - 119
Accounts payable and accrued
liabilities
Foreign exchange derivative
financial instruments - (2) - (2)
Gas, power and nutrient derivative
financial instruments (67) (2) 43 (26)
Other liabilities
Gas, power and nutrient derivative
financial instruments (62) (3) 25 (40)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fair value of financial instruments As at June 30, 2009
----------------------------------------------------------------------------
Level 1 Level 2 Netting Total
----------------------------------------------------------------------------
Cash and cash equivalents 251 - - 251
Accounts receivable
Gas, power and nutrient derivative
financial instruments 26 11 (34) 3
Marketable securities
Investment in CF (available for
sale) 92 - - 92
Other (held for trading) 16 - - 16
Other assets
Gas, power and nutrient derivative
financial instruments 38 2 (30) 10
Other (available for sale) 31 - - 31
Bank indebtedness 349 - - 349
Accounts payable and accrued
liabilities
Foreign exchange derivative
financial instruments - (3) - (3)
Gas, power and nutrient derivative
financial instruments (71) (9) 34 (46)
Other liabilities
Gas, power and nutrient derivative
financial instruments (40) (2) 30 (12)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fair value of financial instruments As at December 31, 2009
----------------------------------------------------------------------------
Level 1 Level 2 Netting Total
----------------------------------------------------------------------------
Cash and cash equivalents 933 - - 933
Accounts receivable
Foreign exchange derivative
financial instruments - 1 - 1
Gas, power and nutrient derivative
financial instruments 35 6 (36) 5
Marketable securities
Investment in CF (available for
sale) 113 - - 113
Other (held for trading) 1 - - 1
Other assets
Gas, power and nutrient derivative
financial instruments 26 3 (26) 3
Other (available for sale) 25 - - 25
Bank indebtedness 106 - - 106
Accounts payable and accrued
liabilities
Gas, power and nutrient derivative
financial instruments (44) (6) 36 (14)
Other liabilities
Gas, power and nutrient derivative
financial instruments (47) (4) 26 (25)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
11. CAPITAL MANAGEMENT
The Company's primary objectives when managing capital are to provide for: (a) an appropriate rate of return to shareholders in relation to the risks underlying the Company's assets; and, (b) a prudent capital structure for raising capital at a reasonable cost for the funding of ongoing operations, capital expenditures, and new growth initiatives.
The ratios outlined in the table below are monitored by the Company in managing its capital.
As at As at
June 30, December 31,
----------------------------------------------------------------------------
2010 2009 2009
----------------------------------------------------------------------------
Net debt to net debt plus equity (%) (a) 17 28 16
Interest coverage (multiple) (b) 10.5 12.4 7.5
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Net debt includes bank indebtedness and long-term debt, net of cash and
cash equivalents. Equity consists of shareholders' equity.
(b) Interest coverage is the last twelve months net earnings before interest
expense, income taxes, depreciation, amortization and asset impairment
divided by interest, which includes interest on long-term debt plus
other interest.
(c) The measures of debt and net earnings described above are non-GAAP
financial measures which do not have a standardized meaning prescribed
by Canadian GAAP and therefore may not be comparable to similar measures
presented by other issuers.
(d) The Company's strategy for managing capital is unchanged from December
31, 2009.
The Company's revolving credit facilities require that the Company maintain specific interest coverage and debt to capital ratios as well as other non-financial covenants as defined in the debt agreements. The Company was in compliance with all covenants at June 30, 2010.
12. SEGMENTATION
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
Consolidated net sales
Retail
Crop nutrients 1,392 1,309 1,763 1,746
Crop protection products 1,238 1,210 1,700 1,636
Seed 588 530 779 678
Services and other 122 99 158 139
----------------------------------------------------------------------------
3,340 3,148 4,400 4,199
----------------------------------------------------------------------------
Wholesale
Nitrogen 444 464 683 693
Potash 188 47 369 89
Phosphate 124 118 239 231
Product purchased for resale 216 240 421 506
Other 70 81 119 126
----------------------------------------------------------------------------
1,042 950 1,831 1,645
----------------------------------------------------------------------------
Advanced Technologies 138 82 201 149
Other (a) (153) (90) (267) (150)
----------------------------------------------------------------------------
4,367 4,090 6,165 5,843
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated inter-segment sales
----------------------------------------------------------------------------
Retail 4 1 9 2
Wholesale 134 78 233 120
Advanced Technologies 15 11 25 28
----------------------------------------------------------------------------
153 90 267 150
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated net earnings
Retail 360 283 288 189
Wholesale 285 215 425 272
Advanced Technologies 15 8 14 9
Other (a) 72 37 (16) 17
----------------------------------------------------------------------------
Earnings before interest and
income taxes (b) 732 543 711 487
Interest on long-term debt 22 21 45 46
Other interest 4 6 8 12
----------------------------------------------------------------------------
Earnings before income taxes (b) 706 516 658 429
Income taxes 200 146 159 119
----------------------------------------------------------------------------
506 370 499 310
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) The Other segment is a non-operating segment for inter-segment
eliminations and corporate functions. Net sales between segments are
accounted for at prices that approximate fair market value.
(b) Net of non-controlling interests.
AGRIUM INC.
Results by Segment
(Unaudited - millions of U.S. dollars)
Schedule 1
Three months ended June 30,
----------------------------------------------------
Advanced
Retail Wholesale Technologies
----------------------------------------------------
2010 2009 2010 2009 2010 2009
------ ------ ------ ------ ------ ------
Net Sales
- external 3,336 3,147 908 872 123 71
- inter-segment 4 1 134 78 15 11
----------------------------------------------------
Total net sales 3,340 3,148 1,042 950 138 82
Cost of product sold 2,621 2,551 768 738 107 65
----------------------------------------------------
Gross profit 719 597 274 212 31 17
Gross profit (%) 22 19 26 22 22 21
----------------------------------------------------
----------------------------------------------------
Selling expenses 304 273 9 9 8 2
EBITDA (1) 387 307 348 244 20 12
EBIT (2) 360 283 285 215 15 8
Three months ended June 30,
---------------------------------
Other Total
---------------------------------
2010 2009 2010 2009
------ ------ ------ ------
Net Sales
- external - - 4,367 4,090
- inter-segment (153) (90) - -
---------------------------------
Total net sales (153) (90) 4,367 4,090
Cost of product sold (192) (154) 3,304 3,200
---------------------------------
Gross profit 39 64 1,063 890
---------------------------------
Gross profit (%) 24 22
---------------------------------
---------------------------------
Selling expenses (2) (3) 319 281
EBITDA (1) 74 39 829 602
EBIT (2) 72 37 732 543
Six months ended June 30,
----------------------------------------------------
Advanced
Retail Wholesale Technologies
----------------------------------------------------
2010 2009 2010 2009 2010 2009
------ ------ ------ ------ ------ ------
Net Sales
- external 4,391 4,197 1,598 1,525 176 121
- inter-segment 9 2 233 120 25 28
----------------------------------------------------
Total net sales 4,400 4,199 1,831 1,645 201 149
Cost of product sold 3,519 3,460 1,340 1,316 155 122
----------------------------------------------------
Gross profit 881 739 491 329 46 27
----------------------------------------------------
Gross profit (%) 20 18 27 20 23 18
----------------------------------------------------
----------------------------------------------------
Selling expenses 504 471 18 17 14 3
EBITDA (1) 342 239 523 323 23 18
EBIT (2) 288 189 425 272 14 9
Six months ended June 30,
---------------------------------
Other Total
---------------------------------
2010 2009 2010 2009
------ ------ ------ ------
Net Sales
- external - - 6,165 5,843
- inter-segment (267) (150) - -
---------------------------------
Total net sales (267) (150) 6,165 5,843
Cost of product sold (273) (218) 4,741 4,680
---------------------------------
Gross profit 6 68 1,424 1,163
---------------------------------
Gross profit (%) 23 20
---------------------------------
---------------------------------
Selling expenses (6) (6) 530 485
EBITDA (1) (12) 21 876 601
EBIT (2) (16) 17 711 487
(1) Net earnings (loss) before interest expense, income taxes, depreciation,
amortization and asset impairment.
(2) Net earnings (loss) before interest expense and income taxes.
AGRIUM INC.
Product Lines
Three months ended June 30
(Unaudited - millions of U.S. dollars)
Schedule 2a
2010
---------------------------------------------------------------
Cost of Cost of
Product Sales Selling Product
Net Sold Gross Tonnes Price Sold Margin
Sales (1)(2) Profit (000's) ($/Tonne) ($/Tonne) ($/Tonne)
---------------------------------------------------------------
Wholesale
Nitrogen 444 304 140 1,256 354 243 111
Potash 188 78 110 529 355 147 208
Phosphate 124 114 10 243 510 469 41
Product
purchased
for resale 216 212 4 759 285 280 5
Other 70 60 10 223
---------------------------------------------------------------
1,042 768 274 3,010 346 255 91
---------------------------------------------------------------
Retail (3)(4)
Crop
nutrients 1,392 1,140 252
Crop
protection
products 1,238 964 274
Seed 588 482 106
Services
and other 122 35 87
-------------------------
3,340 2,621 719
-------------------------
Advanced
Technologies
Turf and
ornamental 97 76 21
Agriculture 41 31 10
-------------------------
138 107 31
-------------------------
Other
inter-
segment
eliminations (153) (192) 39
-------------------------
Total 4,367 3,304 1,063
-------------------------
-------------------------
2009
---------------------------------------------------------------
Cost of Cost of
Product Sales Selling Product
Net Sold Gross Tonnes Price Sold Margin
Sales (1)(2) Profit (000's) ($/Tonne) ($/Tonne) ($/Tonne)
---------------------------------------------------------------
Wholesale
Nitrogen 464 282 182 1,244 373 227 146
Potash 47 24 23 61 770 393 377
Phosphate 118 106 12 260 454 408 46
Product
purchased
for resale 240 268 (28) 681 352 393 (41)
Other 81 58 23 176
---------------------------------------------------------------
950 738 212 2,422 392 304 88
---------------------------------------------------------------
Retail (3)(4)
Crop
nutrients 1,309 1,192 117
Crop
protection
products 1,210 906 304
Seed 530 426 104
Services
and other 99 27 72
-------------------------
3,148 2,551 597
-------------------------
Advanced
Technologies
Turf and
ornamental 57 48 9
Agriculture 25 17 8
-------------------------
82 65 17
-------------------------
Other
inter-
segment
eliminations (90) (154) 64
-------------------------
Total 4,090 3,200 890
-------------------------
-------------------------
(1) Wholesale includes an inventory and purchase commitment write-down for
product purchased for resale of nil (2009 - $32-million).
(2) Includes depreciation and amortization of $67-million (2009 - $30-
million):
(a) Wholesale has $62-million (2009 - $28-million): $19-million for
nitrogen (2009 - $15-million), $18-million for potash (2009 - $4-
million), $23-million for phosphate (2009 - $9-million) and $2-
million for other (2009 - nil)
(b) Advanced Technologies has $5-million (2009 - $2-million)
(3) International Retail net sales were $59-million (2009 - $30-million)
and gross profit was $12-million (2009 - $5-million).
(4) Comparative figures have been reclassified to conform to the current
year's revised categories.
AGRIUM INC.
Product Lines
Six months ended June 30
(Unaudited - millions of U.S. dollars)
Schedule 2b
2010
---------------------------------------------------------------
Cost of Cost of
Product Sales Selling Product
Net Sold Gross Tonnes Price Sold Margin
Sales (1)(2) Profit (000's) ($/Tonne) ($/Tonne) ($/Tonne)
---------------------------------------------------------------
Wholesale
Nitrogen 683 471 212 1,988 344 237 107
Potash 369 153 216 1,063 347 144 203
Phosphate 239 211 28 493 485 428 57
Product
purchased
for resale 421 405 16 1,436 293 282 11
Other 119 100 19 397
---------------------------------------------------------------
1,831 1,340 491 5,377 341 250 91
---------------------------------------------------------------
Retail (3)(4)
Crop
nutrients 1,763 1,448 315
Crop
protection
products 1,700 1,357 343
Seed 779 658 121
Services and
other 158 56 102
------------------------
4,400 3,519 881
------------------------
Advanced
Technologies
Turf and
ornamental 141 110 31
Agriculture 60 45 15
------------------------
201 155 46
------------------------
Other
inter-segment
eliminations (267) (273) 6
------------------------
Total 6,165 4,741 1,424
------------------------
------------------------
2009
---------------------------------------------------------------
Cost of Cost of
Product Sales Selling Product
Net Sold Gross Tonnes Price Sold Margin
Sales (1)(2) Profit (000's) ($/Tonne) ($/Tonne) ($/Tonne)
---------------------------------------------------------------
Wholesale
Nitrogen 693 456 237 1,917 362 238 124
Potash 89 45 44 137 650 329 321
Phosphate 231 193 38 462 500 418 82
Product
purchased
for resale 506 532 (26) 1,564 324 341 (17)
Other 126 90 36 321
---------------------------------------------------------------
1,645 1,316 329 4,401 374 299 75
---------------------------------------------------------------
Retail (3)(4)
Crop
nutrients 1,746 1,611 135
Crop
protection
products 1,636 1,255 381
Seed 678 549 129
Services and
other 139 45 94
------------------------
4,199 3,460 739
------------------------
Advanced
Technologies
Turf and
ornamental 100 85 15
Agriculture 49 37 12
------------------------
149 122 27
------------------------
Other
inter-segment
eliminations (150) (218) 68
------------------------
Total 5,843 4,680
------------------------
------------------------
(1) Wholesale includes an inventory and purchase commitment write-down for
product purchased for resale of nil (2009 - $50-million).
(2) Includes depreciation and amortization of $103-million (2009 - $54-
million):
(a) Wholesale has $96-million (2009 - $49-million): $37-million for
nitrogen (2009 - $26-million), $22-million for potash (2009 - $8-
million), $34-million for phosphate (2009 - $14-million) and $3-
million for other (2009 - $1-million)
(b) Advanced Technologies has $7-million (2009 - $5-million)
(3) International Retail net sales were $86-million (2009 - $50-million)
and gross profit was $17-million (2009 - $9-million).
(4) Comparative figures have been reclassified to conform to the current
year's revised categories.
AGRIUM INC.
Selected Wholesale Volumes and Sales Prices
(Unaudited)
Schedule 3
Three months ended June 30,
--------------------------------------------------
2010 2009
------------------------ ------------------------
Sales Selling Sales Selling
Tonnes Price Tonnes Price
(000's) ($/Tonne) (000's) ($/Tonne)
------------------------ ------------------------
Nitrogen
Domestic
Ammonia 451 409 402 521
Urea 401 373 422 340
Other 299 247 260 253
------------------------ ------------------------
Total domestic nitrogen 1,151 354 1,084 385
International nitrogen 105 342 160 284
------------------------ ------------------------
Total nitrogen 1,256 354 1,244 373
------------------------ ------------------------
Potash
Domestic 329 399 34 728
International 200 279 27 818
------------------------ ------------------------
Total potash 529 355 61 770
------------------------ ------------------------
Phosphate 243 510 260 454
Product purchased for
resale 759 285 681 352
Other
Ammonium sulfate 102 251 88 264
Other 121 88
------------------------ ------------------------
Total other 223 176
------------------------ ------------------------
Total Wholesale 3,010 346 2,422 392
------------------------ ------------------------
------------------------ ------------------------
Six months ended June 30,
--------------------------------------------------
2010 2009
------------------------ ------------------------
Sales Selling Sales Selling
Tonnes Price Tonnes Price
(000's) ($/Tonne) (000's) ($/Tonne)
------------------------ ------------------------
Nitrogen
Domestic
Ammonia 594 395 543 480
Urea 722 364 781 347
Other 477 246 377 263
------------------------ ------------------------
Total domestic nitrogen 1,793 343 1,701 370
International nitrogen 195 347 216 291
------------------------ ------------------------
Total nitrogen 1,988 344 1,917 362
------------------------ ------------------------
Potash
Domestic 678 393 53 737
International 385 265 84 590
------------------------ ------------------------
Total potash 1,063 347 137 650
------------------------ ------------------------
Phosphate 493 485 462 500
Product purchased for
resale 1,436 293 1,564 324
Other
Ammonium sulfate 192 226 194 242
Other 205 127
------------------------ ------------------------
Total other 397 321
------------------------ ------------------------
Total Wholesale 5,377 341 4,401 374
------------------------ ------------------------
------------------------ ------------------------
Contacts:
Agrium Inc.
Richard Downey
Senior Director, Investor Relations
(403) 225-7357
Agrium Inc.
Todd Coakwell
Manager, Investor Relations
(403) 225-7437
Website: www.agrium.com