Agrium Reports Record Second Quarter and First Half Results
CALGARY, ALBERTA -- (Marketwire) -- 08/02/12 -- ALL AMOUNTS ARE STATED IN U.S.$
Agrium Inc. (TSX: AGU) (NYSE: AGU) announced today record consolidated net earnings ("net earnings") of $860-million ($5.44 diluted earnings per share) for the second quarter of 2012, compared with net earnings of $718-million reported in the second quarter of 2011 ($4.54 diluted earnings per share).
The 2012 second quarter results included a pre-tax gain of $3-million ($0.01 diluted earnings per share) on natural gas and other hedge positions and a pre-tax share-based payment expense of $9-million ($0.04 diluted earnings per share). Excluding these items, net earnings would have been $864-million ($5.47 diluted earnings per share) for the second quarter of 2012.(1)
"Agrium's record second quarter results have once again demonstrated the strength of our strategic position across the agricultural value chain. All three business units capitalized on the strong fundamentals in our sector, with Retail and Wholesale achieving their highest EBITDA in history for both the second quarter and the first half of the year. Agrium also generated record cash flow from operations for the quarter and the first half this year. The demand for crop inputs remained strong through to the end of June, despite the very early start to the spring season in the U.S.," said Mike Wilson, Agrium President and CEO.
"The impact of the severe drought in the U.S. has resulted in very strong grain and oilseed prices, and we believe crop yields are likely to be revised downward again. We expect high crop prices and tight grain inventories to create significant support for international nutrient demand in the coming year, as growers globally are expected to expand acreage and optimize application rates. Inventories for most crop nutrients remain tight in North America as retailers have ended the season largely empty. The combination of these factors and an expected early start to the fall harvest and application season is expected to result in solid crop input demand in the back half of 2012 and Agrium will be there to provide the expertise and products necessary for growers to meet the unrelenting global growth in demand for food," added Mr. Wilson.
"I am also pleased that today we were able to reach an agreement for the sale of Viterra's interest in the Medicine Hat nitrogen facility. We received an excellent price for this asset and the resulting purchase price for Viterra's retail business is very attractive. This has provided us with an opportunity to return excess capital to our shareholders, and as a result we have authorized a Cdn$900-million substantial issuer bid to repurchase shares given our strong financial position and the positive outlook for our business," stated Mr. Wilson.
(1)Second quarter effective tax rate of 28 percent used for adjusted diluted earnings per share calculations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
August 2, 2012
Unless otherwise noted, all financial information in this Management's Discussion and Analysis ("MD&A") is prepared using accounting policies in accordance with International Financial Reporting Standards ("IFRS") and is presented in accordance with International Accounting Standard 34 - Interim Financial Reporting. All comparisons of results for the second quarter of 2012 (three months ended June 30, 2012) are against results for the second quarter of 2011 (three months ended June 30, 2011). All dollar amounts refer to United States ("U.S.") dollars except where otherwise stated. Certain financial measures in this MD&A are not prescribed by IFRS, and are defined in the Non-IFRS Financial Measures section of this MD&A.
The following interim MD&A is as of August 2, 2012 and should be read in conjunction with the consolidated interim financial statements for the three and six months ended June 30, 2012 and 2011, and the annual MD&A included in our 2011 Annual Report to Shareholders to which our readers are referred. 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.
2012 SECOND QUARTER OPERATING RESULTS
CONSOLIDATED NET EARNINGS
Agrium's 2012 second quarter consolidated net earnings ("net earnings") were $860-million, or $5.44 diluted earnings per share, compared to net earnings of $718-million, or $4.54 diluted earnings per share, for the same quarter of 2011. Net earnings for the first half of 2012 were $1,015-million, or $6.41 diluted earnings per share, compared to $889-million, or $5.62 diluted earnings per share for the first half of 2011.
Financial Overview
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Three months ended June 30,
(millions of U.S. dollars, except
per share amounts and where
noted) 2012 2011 Change % Change
----------------------------------------------------------------------------
Sales 6,834 6,198 636 10
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Gross profit 1,870 1,675 195 12
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Expenses 646 627 19 3
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Net earnings from continuing
operations before finance costs
and income taxes ("EBIT") 1,224 1,048 176 17
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Net earnings from continuing
operations 860 728 132 18
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Net earnings 860 718 142 20
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Diluted earnings per share from
continuing operations 5.44 4.60 0.84 18
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Diluted earnings per share 5.44 4.54 0.90 20
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Effective tax rate (%) 28 28 N/A -
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Financial Overview
----------------------------------------------------------------------------
Six months ended June 30,
(millions of U.S. dollars, except
per share amounts and where
noted) 2012 2011 Change % Change
----------------------------------------------------------------------------
Sales 10,463 9,152 1,311 14
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Gross profit 2,670 2,400 270 11
----------------------------------------------------------------------------
Expenses 1,200 1,093 107 10
----------------------------------------------------------------------------
Net earnings from continuing
operations before finance costs
and income taxes ("EBIT") 1,470 1,307 163 12
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Net earnings from continuing
operations 1,015 888 127 14
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Net earnings 1,015 889 126 14
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Diluted earnings per share from
continuing operations 6.41 5.62 0.79 14
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Diluted earnings per share 6.41 5.62 0.79 14
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Effective tax rate (%) 28 28 N/A -
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Sales
Retail sales increased by 12 percent to approximately $5.2-billion and 19 percent to approximately $7.7-billion compared to the second quarter and first half of 2011, respectively, due to higher sales volumes of all of our major product lines, with the exception of international crop nutrients. Wholesale sales, were essentially unchanged from 2011 at $1.7-billion and $2.9-billion, respectively, for the second quarter and the first half. Advanced Technologies ("AAT") sales during the quarter and for the first half of 2012 increased by 13 percent to $178-million and 31 percent to $313-million, respectively, compared to the same periods last year attributed to acquisition activity in the second half of 2011.
Gross Profit
Our consolidated gross profit for the second quarter and first half of 2012 increased by $195-million and $270-million, respectively, compared to the second quarter and first half of last year. Highlights for the second quarter and first half of 2012 include the following:
-- An increase in Retail's gross profit of $108-million and $195-million,
for the second quarter and first half of 2012, respectively. Crop
protection products achieved a 23 percent increase and a 22 percent
increase over both the second quarter and first half of 2011,
respectively, due to increased sales volumes; and
-- Wholesale's gross profit increased by 9 percent to $673-million for the
second quarter of 2012, compared to the second quarter of 2011, largely
due to increased nitrogen selling prices.
Expenses
The $19-million increase in expenses for the second quarter of 2012 compared to the second quarter of 2011 is mainly comprised of:
-- Higher Retail selling expenses of $47-million (see section "Retail" for
further discussion); and
-- A $19-million unfavorable change in share-based payments expense, with
$9-million in share-based payments expense in the second quarter of 2012
versus a recovery of $10-million in the second quarter of 2011, (see
section "Other" for further discussion).
These expense increases were partially offset by a $51-million decrease in other expenses, attributable to decreased environmental remediation and asset retirement obligation expenses along with decreased expenses of $14-million related to foreign exchange derivative financial instruments in the second quarter of 2012 versus the second quarter of 2011 (see section "Other" for further discussion).
The following table is a summary of our other expenses (income) for the second quarter and first half of 2012 and 2011:
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Three months ended Six months ended
June 30, June 30,
(millions of U.S. dollars) 2012 2011 2012 2011
----------------------------------------------------------------------------
Realized loss on derivative
financial instruments 12 27 24 75
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Unrealized gain on derivative
financial instruments (15) (15) (14) (45)
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Interest income (19) (19) (35) (33)
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Foreign exchange loss (gain) 12 (17) 12 (42)
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Bad debt expense 16 22 24 27
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Environmental remediation and asset
retirement obligations (1) 23 11 24
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Potash profit and capital tax 8 15 13 26
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Other (8) 20 1 25
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5 56 36 57
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Effective Tax Rate
The effective tax rate was 28 percent for the second quarter and first half of 2012 and is comparable to the effective tax rate of 28 percent for the same periods in 2011.
BUSINESS SEGMENT PERFORMANCE
Retail
Retail generated record 2012 second quarter sales of $5.2-billion, a $600-million increase over the $4.6-billion in sales for the second quarter of 2011. This significant increase was a result of strong demand across all crop input products and services, and a continuation of robust demand throughout the month of June, despite the very early start to the spring planting season. Gross profit was a record $1.1-billion this quarter, compared to the $996-million earned in the second quarter of 2011. Retail also achieved record earnings from continuing operations before finance costs, income taxes, depreciation and amortization ("EBITDA") of $605-million in the second quarter of 2012, a $76-million increase over the $529-million EBITDA reported in the second quarter last year.
Crop nutrient sales reached $2.4-billion this quarter, compared to $2.1-billion in the same quarter last year. The 12 percent increase was due primarily to record corn acreage planted this year in North America and growers taking advantage of favorable crop prices. Despite an earlier than normal spring planting season, North American nutrient sales volumes were approximately 4 percent higher this quarter than the second quarter of 2011 and were up approximately 13 percent for the first half of 2012 over the same period last year. Gross profit for crop nutrients was $400-million this quarter, $23-million higher than the $377-million reported in the second quarter of 2011. Total crop nutrient margins were 17 percent in the second quarter of 2012, just 1 percent lower than the same quarter last year.
Crop protection sales were $1.7-billion in the second quarter of 2012, an 18 percent increase over the $1.5-billion in sales for the same period last year. Total crop protection gross profit this quarter was $400-million, a 23 percent increase over the $325-million recorded in the second quarter of 2011. The increase in sales and gross profit was due to higher sales volumes across all of our global product lines and slightly higher margins. Crop protection product margins as a percentage of sales were 23 percent for the second quarter of 2012, up 1 percent from the second quarter last year due to a higher percentage sales mix of our private label products and improvement in margins for our Australian Landmark business, which were 18 percent this quarter, up 4 percent from the second quarter last year.
Seed sales reached $712-million in the second quarter of 2012, compared to $687-million in the second quarter last year. Gross profit was $125-million this quarter, compared to $132-million in the second quarter of 2011. Higher sales of soybeans and small grains as a percentage of the total seed sales caused the slight decline in margins this quarter.
Sales of merchandise in the second quarter of 2012 were $157-million, compared to $208-million in the second quarter of 2011. Gross profit for this product line was $32-million this quarter, a 19 percent increase over the $27-million reported in the second quarter last year.
Services and other sales were $264-million this quarter, 47 percent higher than the $180-million reported in the second quarter of 2011. Gross profit was $147-million in the second quarter of 2012, compared to $135-million for the same period last year. The increase in sales and gross profit this quarter was attributable to increased custom application services resulting from strong demand for nutrients and crop protection products in North America.
Retail selling expenses for the second quarter of 2012 were $520-million, up $47-million from last year. The increase was due to higher payroll expenses related to the increase in sales activity and performance incentives this quarter, as well as new acquisitions. However, selling expenses as a percentage of sales were 10 percent in the second quarter of 2012, unchanged from the second quarter of 2011.
Wholesale
Wholesale's 2012 second quarter sales were a record $1.7-billion, slightly higher than the previous record reported in the same quarter last year. Gross profit for this quarter was the highest in company history at $673-million, an increase of 9 percent over the previous record achieved in the second quarter of 2011. Wholesale's EBITDA of $686-million in the second quarter of 2012 was also a record, substantially exceeding the $617-million reported in the same period last year. These record earnings were primarily due to higher realized sales prices and lower input costs for our nitrogen business, which were driven by a tight supply/demand balance for nitrogen products globally and a decrease in North American benchmark gas prices compared to the second quarter last year.
Nitrogen gross profit was a record $431-million in the second quarter of 2012, an increase of 33 percent over the previous record of $324-million reported in the same quarter last year, due to higher realized sales prices and lower input costs. Both benchmark and Agrium's realized sales prices were higher for all nitrogen products in the second quarter of 2012 compared to the same period last year, with the exception of realized prices for nitrates. Total nitrogen sales volumes were 1.3 million tonnes, which was 9 percent lower than the same period last year due to tighter opening domestic inventories of urea this quarter and weaker demand in Argentina. Nitrogen cost of product sold was $241 per tonne this quarter, significantly lower than the $274 per tonne reported in the second quarter of 2011. This was due to a combination of lower natural gas costs in the second quarter of 2012 and higher costs resulting from planned and unplanned outages in the same quarter last year. Our average nitrogen margins were a record $332 per tonne this quarter, compared with $226 per tonne in the same period last year.
Agrium's average natural gas cost in cost of product sold was $2.62/MMBtu ($3.07/MMBtu including the impact of realized losses on natural gas derivatives) this quarter, compared to $4.00/MMBtu for the same period in 2011 ($4.11/MMBtu including the impact of realized losses on natural gas derivatives). Hedging gains or losses on all gas derivatives are not taken into account for the calculation of gross profit and are included in other expenses and therefore not included in cost of product sold. The U.S. benchmark (NYMEX) natural gas price for the second quarter of 2012 was $2.26/MMBtu, compared to $4.36/MMBtu in the same quarter last year. The AECO (Alberta) basis differential was a $0.44/MMBtu discount to NYMEX in the second quarter of 2012, which was similar to the $0.46/MMBtu differential that existed in the second quarter of 2011.
Potash gross profit for the second quarter of 2012 was $153-million, compared to $165-million in the same quarter last year. The decrease was attributable primarily to lower domestic sales volumes of 285,000 tonnes, compared to 316,000 tonnes in the second quarter of 2011. This was due to the combination of softer North American market conditions and shipping delays associated with a strike at Canadian Pacific Railway. International sales volumes were 227,000 tonnes in the second quarter of 2012, matching those reported in the second quarter of 2011. Potash cost of product sold was $181 per tonne this quarter, compared to $173 per tonne in the second quarter of 2011. The increase in cost of product sold per tonne was primarily due to lower volumes produced this quarter. Gross margin on a per tonne basis was $299 in the second quarter of 2012, compared to the $304 per tonne realized during the same quarter in 2011.
Phosphate gross profit was $42-million in the second quarter of 2012, compared to $83-million in the same quarter last year. This decrease was due to lower realized sales prices, resulting from a more balanced market relative to the tight supply/demand situation that existed in the second quarter of 2011, as well as higher input costs. This was partially offset by higher total phosphate sales volumes of 313,000 tonnes this quarter, compared to 259,000 tonnes sold in the second quarter of 2011. Phosphate cost of product sold was $581 per tonne in the second quarter of 2012 as compared to $475 per tonne in the same period last year. The increase in cost of product sold was due to planned turnarounds at both of our phosphate facilities and higher rock and sulphur costs compared to the same period last year. On a per tonne basis, gross margin in the second quarter of 2012 decreased to $132 per tonne, compared to $320 per tonne in the same period last year.
Wholesale's Other product category, which is primarily comprised of ammonium sulfate and Rainbow granulated products, achieved gross profit of $30-million in the second quarter of 2012, compared to $26-million in the same period last year. Gross profit from product purchased for resale was $17-million this quarter, compared to $22-million in the second quarter of 2011.
Wholesale expenses in the second quarter of 2012 were $39-million, compared to $51-million in the second quarter of 2011. The decrease is primarily attributable to non-recurring expenses in the second quarter of 2011, as well as a reduction in potash profit tax in 2012 due to deductions from the taxable base for investment related to our Vanscoy expansion project.
Advanced Technologies
AAT gross profit was $36-million in the second quarter of 2012, a decrease of $1-million from the $37-million reported in the second quarter of 2011. Higher gross profit from the Tetra Micronutrients and Evergro acquisitions in 2011, as well as stronger sales in the Direct Solutions segment in the United States this quarter were offset by lower sales volumes of Environmentally Smart Nitrogen ("ESN") as a result of the unplanned outages in the first half of 2012 at our Carseland nitrogen facility.
EBITDA was $20-million this quarter, exceeding the $18-million achieved in the second quarter of 2011. Other income was $3-million higher this quarter compared to $nil reported in the same period last year, resulting primarily from a new commercial arrangement with a former joint venture partner. This offset higher selling expenses for AAT as a result of the acquisitions made in the second half of 2011.
Other
EBITDA for our Other non-operating business unit for the second quarter of 2012 was $24-million, compared to a loss of $19-million for the second quarter of 2011. The favorable increase was primarily driven by:
-- A $35-million increase in gross profit for the three months at June 30,
2012 compared to the three months at June 30, 2011 reflected less inter-
segment inventory not yet sold to external customers;
-- A $16-million decrease in environmental remediation and asset retirement
obligation expenses. This relates to additional expenses incurred in the
second quarter of 2011 and no corresponding increase in 2012.
This was offset by a $19-million increase in share-based payments expense, where there was a $9-million charge in the second quarter of 2012 compared to a $10-million recovery in the same quarter of 2011. The increase in share-based payments expense was largely caused by appreciation of our share price during the second quarter of 2012 compared to depreciation in the share price in the same period for 2011.
EBITDA for Other in the first half of 2012 was a loss of $104-million, compared to a loss of $112-million for the first half of 2011. The favorable change was comprised of:
-- A $68-million increase in gross profit for the six months at June 30,
2012 compared to the six months at June 30, 2011 reflected less inter-
segment inventory not yet sold to external customers;
-- A decrease in net realized and unrealized losses from derivative
financial instruments of $34-million.
This was offset by a $71-million increase in share-based payments expense, where there was a $73-million charge in the first half of 2012 compared to a $2-million charge in the first half of 2011.
FINANCIAL CONDITION
The following are changes to working capital on our Consolidated Balance Sheets in the six-month period ended June 30, 2012.
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As at December
(millions of U.S. June 30, 31, $ % Explanation of the
dollars) 2012 2011 Change Change change in balance
----------------------------------------------------------------------------
Current assets
Cash and cash 1,946 1,346 600 45% See discussion under
equivalents the section
"Liquidity and
Capital Resources".
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Accounts receivable 3,766 1,984 1,782 90% Increased sales
during the spring
coupled with higher
Retail vendor
rebates receivable.
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Income taxes 15 138 (123) (89%) Collection of U.S.
receivable income tax
receivables and an
increase in the
accrued current
income tax
liability.
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Inventories 2,398 2,956 (558) (19%) Inventory draw-down
due to increased
seasonal sales
activity.
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Prepaid expenses and 144 643 (499) (78%) Draw-down of prepaid
deposits inventory due to
increased sales
activities in the
spring.
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Assets of - 70 (70) (100%) The entity remaining
discontinued in discontinued
operations operations at
December 31, 2011
was sold in April
2012.
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Current liabilities
Short-term debt 348 245 103 42% Increased working
capital needs for
North American
operations.
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Accounts payable 3,348 2,959 389 13% Increased Retail
inventory purchases,
due to increased
sales activity,
partially offset by
draw-down of
customer prepayments
during the spring
application.
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Income taxes payable 197 82 115 140% Increase in the
excess accrued
current taxes over
related installments
for Canada and the
U.S.
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Current portion of 529 20 509 2,545% Floating rate bank
long-term debt loans and South
American long-term
debt, due at various
dates within the
next 12 months, were
classified as
current.
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Current portion of 84 68 16 24% Movement of asset
other provisions retirement
obligations and
environmental
remediation
liabilities from
long-term to
current.
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Liabilities of - 53 (53) (100%) The entity remaining
discontinued in discontinued
operations operations at
December 31, 2011
was sold in April
2012.
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Working capital 3,763 3,710 53 1%
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LIQUIDITY AND CAPITAL RESOURCES
Summary of Consolidated Statements of Cash Flows
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 Flows:
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Six months ended June 30,
(millions of U.S. dollars) 2012 2011 Change
----------------------------------------------------------------------------
Cash provided by operating activities 1,120 76 1,044
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Cash (used in) provided by investing
activities (596) 407 (1,003)
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Cash provided by (used in) financing
activities 82 (153) 235
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Effect of exchange rate changes on cash and
cash equivalents (6) 12 (18)
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Increase in cash and cash equivalents from
continuing operations 600 342 258
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Cash and cash equivalents used in discontinued
operations - (11) 11
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The sources and uses of cash for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 are summarized below:
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Cash provided by operating activities - Drivers behind the $1,044-million
source of cash increase
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Source of cash - $127-million increase in consolidated net earnings from
continuing operations.
- $926-million increase provided from changes in non-cash
working capital. The increase was primarily driven by a
greater reduction in inventory, a lower increase in
receivables and a greater increase in payables for the first
half of 2012 versus the first half of 2011.
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Cash (used in) provided by investing activities - Drivers behind the $1,003-
million use of cash increase
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Source of cash - $37-million decrease in investments purchased during the
six months ended June 30, 2012 versus the same period in
2011.
- $29-million increase provided from net change in non-cash
working capital due to higher accounts payable related to
capital expenditures.
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Use of cash - $694-million increase as proceeds were received in May
2011 from the sale of the majority of the Commodity
Management businesses to Cargill, originally acquired as
part of AWB Limited.
- $45-million increase resulting from $72-million in various
Retail acquisitions during the first half of 2012 compared
to the $27-million Wholesale acquisition of Cereraltoscana
S.p.A. and Agroport in 2011.
- $268-million increase in capital expenditures primarily
related to the Vanscoy potash expansion project.
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Cash provided by (used in) financing activities - Drivers behind the $235-
million source of cash increase
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Source of cash - A $130-million increase due to the repayment of $125-
million debentures in 2011 and no corresponding debenture
repayment in 2012.
- A $116-million increase in cash provided by short-term
debt as $93-million was issued during the first half of 2012
versus a repayment of $23-million in the first half of 2011.
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Use of cash - $27-million increase in dividends paid in the first half
of 2012 resulting from quadrupling the dividends declared in
December 2011 and paid in the first half of 2012 compared to
the amount paid in the first half of 2011.
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Capital Expenditures
----------------------------------------------------------------------------
June 30, June 30,
(millions of U.S. dollars) 2012 2011
----------------------------------------------------------------------------
Sustaining capital 244 171
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Investing capital 270 75
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Total 514 246
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Our sustaining and investing capital expenditures increased in the first half of 2012 compared to the first half of 2011 due to continued activity on the Vanscoy potash expansion project.
Short-term Debt
Our short-term debt as at June 30, 2012 is summarized as follows:
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Total Unutilized Utilized
----------------------------------------------------------------------------
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Multi-jurisdictional facility
expiring 2016 1,600 1,481 119
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North American facilities
expiring 2012 - 2013 200 200 -
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European facilities expiring
2012 - 2013 317 146 171
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South American facilities
expiring 2012 126 68 58
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2,243 1,895 348
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Outstanding letters of credit 194
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Remaining capacity available 1,701
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Capital Management
In April 2012, we filed a base shelf prospectus in Canada and the U.S. permitting the issuance of up to $2.5-billion of common shares, preferred shares, subscription receipts, debt securities or units over the 25-month period that the base shelf prospectus remains effective. The base shelf replaced a base shelf prospectus that expired in 2011. We have not issued securities under the base shelf prospectus.
OUTSTANDING SHARE DATA
The number of Agrium's outstanding shares as at July 31, 2012 was approximately 158 million. As at July 31, 2012, the number of shares issuable pursuant to stock options outstanding (issuable assuming full conversion, where each option granted can be exercised for one common share) was approximately 0.1 million.
SELECTED QUARTERLY INFORMATION
----------------------------------------------------------------------------
(millions of U.S. dollars, 2012 2012 2011 2011 2011 2011 2010 2010
except per share amounts) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
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Sales 6,834 3,629 3,177 3,141 6,198 2,954 2,398 2,066
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Gross profit 1,870 800 1,045 888 1,675 725 725 498
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Net earnings from continuing
operations 860 155 327 293 728 160 152 61
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Net earnings 860 155 193 293 718 171 135 61
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Earnings per share from
continuing operations
----------------------------------------------------------------------------
-basic 5.44 0.97 2.05 1.86 4.61 1.02 0.97 0.39
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-diluted 5.44 0.97 2.04 1.85 4.60 1.02 0.97 0.39
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Earnings per share
----------------------------------------------------------------------------
-basic 5.44 0.97 1.20 1.86 4.55 1.09 0.86 0.39
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-diluted 5.44 0.97 1.20 1.85 4.54 1.09 0.86 0.39
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The agricultural products business is seasonal in nature. Consequently, comparisons made on a year-over-year basis are more appropriate than quarter-over-quarter. Crop input sales are primarily concentrated in the spring and fall crop input application seasons, which are in the second quarter and fourth quarter. Crop nutrient inventories are normally accumulated leading up to the application season. Cash collections generally occur after the application season is complete in the Americas and Australia.
BUSINESS ACQUISITION
On March 19, 2012, we signed an agreement to acquire the majority of the Agri-products business of Viterra Inc. ("Viterra"), consisting of approximately 90 percent of Viterra's 258 Canadian farm centres; 17 Australian retail farm centres; a 34 percent interest in a nitrogen facility in Medicine Hat, Canada; storage and distribution assets; and other assets and liabilities (collectively the "Agrium Assets"). The purchase price is expected to be approximately Cdn$1.65-billion, including estimated working capital of Cdn$500-million. For further information on this agreement, please refer to Form 51-102F3, Material Change Report, dated March 20, 2012 filed on SEDAR at www.sedar.com. Agrium will acquire the Agrium Assets from Glencore International plc ("Glencore") after obtaining any required consents to transfers and regulatory clearances. Shareholders of Viterra approved the acquisition by Glencore on May 29, 2012. Glencore received approval of its acquisition of Viterra under the Investment Canada Act on July 15, 2012, however other regulatory approvals remain outstanding.
On August 2, 2012, Agrium and Glencore announced that CF Industries Holdings Inc. ("CF"), owner of a 66 percent interest in the Medicine Hat nitrogen facility, will acquire Viterra's 34 percent interest for Cdn$915-million. Accordingly, Agrium will not acquire an interest in the Medicine Hat facility. The agreement between Glencore and CF is subject to regulatory approval. Agrium will continue to receive the benefit of Viterra's operating cash flow on the Medicine Hat nitrogen facility from March 31, 2012 to closing of the purchase of Viterra's 34 percent interest by CF.
DUTCH AUCTION SUBSTANTIAL ISSUER BID
On August 2, 2012, Agrium's Board of Directors authorized a Dutch auction substantial issuer bid (the "Bid"). Under the Bid, we will repurchase Cdn$900-million of our outstanding common shares.
NON-IFRS FINANCIAL MEASURES
In the discussion of our performance for the quarter, in addition to the primary measures of earnings and earnings per share reported in accordance with IFRS, we make reference to EBITDA. We consider EBITDA to be a useful measure 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.
EBITDA is not a recognized measure under IFRS, and our method of calculation may not be comparable to other companies. Similarly, EBITDA should not be used as an alternative to net earnings from continuing operations as determined in accordance with IFRS.
The following table is a reconciliation of EBITDA to consolidated net earnings from continuing operations as determined in accordance with IFRS:
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Three months ended
June 30, 2012
-----------------------------------------------------
(millions of U.S.
dollars) Retail Wholesale AAT Other Consolidated
----------------------------------------------------------------------------
EBITDA 605 686 20 24 1,335
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Depreciation and
amortization 49 52 6 4 111
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EBIT 556 634 14 20 1,224
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Finance costs related
to long-term debt (22)
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Other finance costs (10)
----------------------------------------------------------------------------
Income taxes (332)
----------------------------------------------------------------------------
Net earnings from
continuing operations 860
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Three months ended
June 30, 2011
------------------------------------------------------
(millions of U.S.
dollars) Retail Wholesale AAT Other Consolidated
----------------------------------------------------------------------------
EBITDA 529 617 18 (19) 1,145
----------------------------------------------------------------------------
Depreciation and
amortization 43 48 5 1 97
----------------------------------------------------------------------------
EBIT 486 569 13 (20) 1,048
----------------------------------------------------------------------------
Finance costs related
to long-term debt (24)
----------------------------------------------------------------------------
Other finance costs (12)
----------------------------------------------------------------------------
Income taxes (284)
----------------------------------------------------------------------------
Net earnings from
continuing operations 728
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended
June 30, 2012
----------------------------------------------------
(millions of U.S.
dollars) Retail Wholesale AAT Other Consolidated
----------------------------------------------------------------------------
EBITDA 706 1,048 22 (104) 1,672
----------------------------------------------------------------------------
Depreciation and
amortization 93 88 13 8 202
----------------------------------------------------------------------------
EBIT 613 960 9 (112) 1,470
----------------------------------------------------------------------------
Finance costs related
to long-term debt (44)
----------------------------------------------------------------------------
Other finance costs (20)
----------------------------------------------------------------------------
Income taxes (391)
----------------------------------------------------------------------------
Net earnings from
continuing operations 1,015
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended
June 30, 2011
-----------------------------------------------------
(millions of U.S.
dollars) Retail Wholesale AAT Other Consolidated
----------------------------------------------------------------------------
EBITDA 554 1,029 19 (112) 1,490
----------------------------------------------------------------------------
Depreciation and
amortization 83 83 11 6 183
----------------------------------------------------------------------------
EBIT 471 946 8 (118) 1,307
----------------------------------------------------------------------------
Finance costs related
to long-term debt (51)
----------------------------------------------------------------------------
Other finance costs (25)
----------------------------------------------------------------------------
Income taxes (343)
----------------------------------------------------------------------------
Net earnings from
continuing operations 888
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
We prepare our financial statements in accordance with IFRS, which requires us to make assumptions and estimates about future events and apply significant judgments. We base our assumptions, estimates and judgments on our historical experience, current trends and all available information that we believe is relevant at the time we prepare the financial statements. However future events and their effects cannot be determined with certainty. Accordingly, as confirming events occur, actual results could ultimately differ from our assumptions and estimates. Such differences could be material. For further information on the Company's critical accounting estimates, please refer to the "Critical Accounting Estimates" section of our 2011 annual Management's Discussion and Analysis, which is contained in our 2011 Annual Report. Since the date of our 2011 annual Management's Discussion and Analysis, there have not been any significant changes to our critical accounting estimates and judgments.
CHANGES IN ACCOUNTING POLICIES
For information regarding changes in accounting policies, please refer to the "Accounting Standards and Policy Changes Not Yet Implemented" section of our 2011 annual Management's Discussion and Analysis, which is contained in our 2011 Annual Report.
BUSINESS RISKS
The information presented on Enterprise Risk Management and Key Business Risks on pages 68 - 71 in our 2011 Annual Report has not changed materially since December 31, 2011.
CONTROLS AND PROCEDURES
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PUBLIC SECURITIES FILINGS
Additional information about our company, including our 2011 Annual Information Form is filed with the Canadian securities regulatory authorities through SEDAR at www.sedar.com and with the U.S. securities regulatory authorities through EDGAR at www.sec.gov.
OUTLOOK, KEY RISKS AND UNCERTAINTIES
The outlook for grain and oilseed prices has improved dramatically over the past two months as several significant weather-related problems have reduced crop production expectations in key growing regions. The most severe weather damage has occurred in the U.S. Corn Belt region. The U.S. National Oceanic and Atmospheric Administration reported that the drought in the U.S. is the worst since 1956. U.S. corn condition ratings are at the lowest levels since the severe drought in 1988, when corn yields were 25 percent below trend levels. In its July crop production forecast, the U.S. Department of Agriculture ("USDA") reduced its U.S. corn yield forecast by 20 bushels per acre to 146 bushels per acre, and most analysts expect final yields to decline further from those projections. In addition to the devastating crop damage in the U.S., Russian and Ukrainian wheat production and export forecasts have been reduced significantly and the Indian monsoon rains have been below average levels so far in 2012.
The drought in the U.S. Corn Belt will impact both growers and consumers of grains and oilseeds. Fortunately, most growers in the U.S. entered the 2012 growing season with a historically strong balance sheet and are covered by crop insurance, which should provide significant cash flow to pay for crop inputs in 2012/2013. Globally, growers in geographies with more favourable growing conditions stand to be the largest beneficiaries. In Western Canada, crop conditions are generally good and growers planted over 8 million more acres this spring compared to the same period in 2011. In South America, it is expected that growers will maximize planting of corn and soybeans beginning in October. Finally, in Australia, the winter crop is early in development, but growers stand to benefit from increased wheat prices.
U.S. crop nutrient demand has historically increased in years following droughts, in part due to higher crop prices the following year and the resulting increase in acreage. We do not expect soil test results to alter historical recommendations on nitrogen, phosphate and potash application rates for 2013, especially given the long-term trend of declining phosphate and potash levels in many soils and the fact that a large portion of crop nutrient uptake occurs in early plant development. U.S. growers started the year in a very strong financial position and with high crop prices in 2012/2013, we do not expect a reduction in application rates. However, if drought conditions extend into the fall of 2012, there is the potential for growers in the hardest hit regions to delay crop nutrient application decisions until moisture is received. Crop protection demand in the first half of 2012 was strong with the exception of fungicides which is directly related to the drought in the U.S. this year. Back half demand for crop protection products may be negatively impacted depending on the severity and length of the heat and lack of moisture in the U.S. Midwest. Seed demand should be supported by strong wheat prices and planted acreage this fall and increased total North American planted area in 2013.
Global nitrogen prices have been volatile, at relatively high levels, over the past few months. Urea prices declined in June as the spring season wrapped up, but have rebounded off of lows faster than many analysts had expected. The North American granular urea market has maintained a strong premium to other markets over the past few months. Indian demand for urea has been strong, but demand in the second half of 2012 will partially depend on the Indian monsoon over the next couple of months. The supply/demand balance in the global ammonia market has remained tight due to gas restrictions, primarily in Trinidad, and lower than expected production at the new Qafco 5 and 6 plants. The high crop prices are expected to support nitrogen demand in the second half of 2012. Northern hemisphere winter wheat prospects look much more positive than they did a couple of months ago, and the signal to boost corn production in South America is also strong.
The global phosphate market has been balanced to tight over the past couple of months, aided by India purchasing DAP on the spot market. Import demand from Brazil has been running at levels slightly lower than in the first half of 2011, but has picked up over the past couple of months. Reportedly tight domestic inventories and strong crop prices are expected to support strong Brazilian import demand in the second half of 2012. The Ma'aden phosphate project continues to struggle to achieve capacity utilization above 50 percent, which has further contributed to tight global DAP export supply. China is in the midst of its low export tax season but is expected to ship lower levels of phosphate fertilizers this year.
Global potash deliveries have improved over the past couple of months, but North American producer potash inventories remain at relatively high levels. Brazilian demand has lagged behind 2011 levels so far this year, however, low inventories and record high crop prices should support strong seasonal demand over the coming months. Chinese potash imports are up approximately 20 percent in the first half of 2012 compared to the same period in 2011. Chinese buyers are currently negotiating second half contracts with key potash suppliers. Indian potash purchases have been impacted by reduced demand due to changes in domestic subsidy levels and devaluation of the Rupee. Indian domestic potash shipments have increased recently, but uncertainty exists regarding completion of supply agreements for the back half of 2012. In general, there has been a drawdown in retail potash inventories globally in the first half of 2012 and we expect replenishment of the pipeline in the second half of the year.
Forward-Looking Statements
Certain statements and other information included in this MD&A 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 (collectively, the "forward-looking statements"). All statements in this MD&A, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to, statements as to management's expectations with respect to: future crop and crop input volumes, demand, margins, prices and sales; business and financial prospects; and other plans, strategies, objectives and expectations, including with respect to future operations of Agrium. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements.
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions listed below. Although Agrium believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The key assumptions that have been made in connection with the forward-looking statements include Agrium's ability to successfully integrate and realize the anticipated benefits of its already completed and future acquisitions, including the acquisition of retained AWB Limited ("AWB") businesses and the proposed acquisition of the Agri-products business of Viterra.
Events or circumstances 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 including impacts from regional flooding and/or drought 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, government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof, and political risks, including civil unrest, actions by armed groups or conflict. There is a risk that the Egyptian Misr Fertilizers Production Company S.A.E. ("MOPCO") nitrogen facility in Egypt may not be allowed to restart production or proceed with the completion of the two new facilities. Additionally, there are risks associated with Agrium's acquisition of AWB, including: size and timing of expected synergies could be less favourable than anticipated; AWB is subject to dispute and litigation risk (including as a result of being named in litigation commenced by the Iraqi Government relating to the United Nations Oil-For-Food Programme), as well as counterparty and sovereign risk; and other risk factors detailed from time to time in Agrium reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States. Furthermore, there are risks associated with the proposed acquisition of the Agri-products business of Viterra, including: completion of the acquisition of Viterra by Glencore International plc and the subsequent acquisition and further divestiture of the assets proposed to be purchased by Agrium, as well as the timing thereof; the receipt of the necessary regulatory approvals in respect of the assets proposed to be purchased by Agrium and the satisfaction of other conditions precedent to closing; potential liabilities associated with the assets proposed to be assumed by Agrium, which may not be known to Agrium at this time due, in part, to the fact that the nature of the transaction did not allow for Agrium to complete customary due diligence prior to entering into the agreement to purchase the assets; and the amount of the final purchase price for the purchased assets.
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 U.S. federal securities laws or applicable Canadian securities legislation.
OTHER
Agrium Inc. is a major Retail supplier of agricultural products and services in North America, South America and Australia and 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 2012 2nd Quarter Conference Call will be available in a listen-only mode beginning Friday, August 3, 2012 at 6:30 a.m. MT (8:30 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 ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales 6,834 6,198 10,463 9,152
----------------------------------------------------------------------------
Cost of product sold 4,964 4,523 7,793 6,752
----------------------------------------------------------------------------
Gross profit 1,870 1,675 2,670 2,400
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 541 488 911 841
----------------------------------------------------------------------------
General and administrative 104 92 263 202
----------------------------------------------------------------------------
Earnings from associates (4) (9) (10) (7)
----------------------------------------------------------------------------
Other expenses (note 4) 5 56 36 57
----------------------------------------------------------------------------
Earnings before finance costs and
income taxes 1,224 1,048 1,470 1,307
----------------------------------------------------------------------------
Finance costs related to long-term
debt 22 24 44 51
----------------------------------------------------------------------------
Other finance costs 10 12 20 25
----------------------------------------------------------------------------
Earnings before income taxes 1,192 1,012 1,406 1,231
----------------------------------------------------------------------------
Income taxes 332 284 391 343
----------------------------------------------------------------------------
Net earnings from continuing
operations 860 728 1,015 888
----------------------------------------------------------------------------
Net (loss) earnings from
discontinued operations (note 3) - (10) - 1
----------------------------------------------------------------------------
Net earnings 860 718 1,015 889
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
----------------------------------------------------------------------------
Equity holders of Agrium 860 717 1,013 889
----------------------------------------------------------------------------
Non-controlling interest - 1 2 -
----------------------------------------------------------------------------
Net earnings 860 718 1,015 889
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share attributable to
equity holders of Agrium (note 5)
----------------------------------------------------------------------------
Basic earnings per share from
continuing operations 5.44 4.61 6.41 5.63
----------------------------------------------------------------------------
Basic (loss) earnings per share
from discontinued operations - (0.06) - 0.01
----------------------------------------------------------------------------
Basic earnings per share 5.44 4.55 6.41 5.64
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted earnings per share from
continuing operations 5.44 4.60 6.41 5.62
----------------------------------------------------------------------------
Diluted loss per share from
discontinued operations - (0.06) - -
----------------------------------------------------------------------------
Diluted earnings per share 5.44 4.54 6.41 5.62
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Comprehensive Income
(Millions of U.S. dollars)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings 860 718 1,015 889
----------------------------------------------------------------------------
Other comprehensive (loss) income
----------------------------------------------------------------------------
Items that may be reclassified to
earnings
----------------------------------------------------------------------------
Available for sale financial
instruments
----------------------------------------------------------------------------
Gains - 1 - 1
----------------------------------------------------------------------------
Reclassifications to earnings - (2) - (2)
----------------------------------------------------------------------------
Foreign currency translation
----------------------------------------------------------------------------
(Losses) gains (48) 40 (13) 60
----------------------------------------------------------------------------
Reclassifications to earnings - (23) - (23)
----------------------------------------------------------------------------
Other comprehensive (loss) income
of associates (2) 8 (2) 1
----------------------------------------------------------------------------
(50) 24 (15) 37
----------------------------------------------------------------------------
Items that will not be
reclassified to earnings
----------------------------------------------------------------------------
Actuarial losses on post-
employment benefit plans
----------------------------------------------------------------------------
Losses (22) - (22) -
----------------------------------------------------------------------------
Deferred income taxes 6 - 6 -
----------------------------------------------------------------------------
(16) - (16) -
----------------------------------------------------------------------------
Other comprehensive (loss) income (66) 24 (31) 37
----------------------------------------------------------------------------
Comprehensive income 794 742 984 926
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
----------------------------------------------------------------------------
Equity holders of Agrium 794 744 983 933
----------------------------------------------------------------------------
Non-controlling interest - (2) 1 (7)
----------------------------------------------------------------------------
Comprehensive income 794 742 984 926
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating
----------------------------------------------------------------------------
Net earnings from continuing
operations 860 728 1,015 888
----------------------------------------------------------------------------
Items not affecting cash
----------------------------------------------------------------------------
Depreciation and amortization 111 97 202 183
----------------------------------------------------------------------------
Earnings from associates (4) (9) (10) (7)
----------------------------------------------------------------------------
Share-based payments 9 (10) 73 2
----------------------------------------------------------------------------
Unrealized gain on derivative
financial instruments (15) (15) (14) (45)
----------------------------------------------------------------------------
Unrealized foreign currency
translation (gain) loss (1) 8 (7) 8
----------------------------------------------------------------------------
Deferred income taxes (12) 63 (13) 69
----------------------------------------------------------------------------
Other 4 27 16 33
----------------------------------------------------------------------------
Dividends from associates 2 16 3 16
----------------------------------------------------------------------------
Net changes in non-cash working
capital (496) (1,231) (145) (1,071)
----------------------------------------------------------------------------
Cash provided by (used in) operating
activities 458 (326) 1,120 76
----------------------------------------------------------------------------
Investing
----------------------------------------------------------------------------
Acquisitions, net of cash acquired (3) (27) (72) (27)
----------------------------------------------------------------------------
Proceeds from disposal of
discontinued operations - 694 - 694
----------------------------------------------------------------------------
Capital expenditures (299) (136) (514) (246)
----------------------------------------------------------------------------
Investments in associates - - 10 -
----------------------------------------------------------------------------
Purchase of investments (1) (4) (3) (40)
----------------------------------------------------------------------------
Proceeds from disposal of
investments - 36 - 36
----------------------------------------------------------------------------
Other (37) 6 (46) (10)
----------------------------------------------------------------------------
Net changes in non-cash working
capital 26 - 29 -
----------------------------------------------------------------------------
Cash (used in) provided by investing
activities (314) 569 (596) 407
----------------------------------------------------------------------------
Financing
----------------------------------------------------------------------------
Short-term debt 48 (48) 93 (23)
----------------------------------------------------------------------------
Long-term debt issued 14 10 21 10
----------------------------------------------------------------------------
Repayment of long-term debt (1) (8) (3) (133)
----------------------------------------------------------------------------
Dividends paid (a) - - (36) (9)
----------------------------------------------------------------------------
Shares issued, net of issuance
costs - 1 7 2
----------------------------------------------------------------------------
Cash provided by (used in) financing
activities 61 (45) 82 (153)
----------------------------------------------------------------------------
Effect of exchange rate changes on
cash and cash equivalents (11) 22 (6) 12
----------------------------------------------------------------------------
Increase in cash and cash
equivalents from
continuing operations 194 220 600 342
----------------------------------------------------------------------------
Cash and cash equivalents provided
by (used in) discontinued
operations (note 3) - 299 - (11)
----------------------------------------------------------------------------
Cash and cash equivalents -
beginning of period 1,752 447 1,346 635
----------------------------------------------------------------------------
Cash and cash equivalents - end of
period 1,946 966 1,946 966
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Included in operating activities
----------------------------------------------------------------------------
Interest paid 14 19 58 60
----------------------------------------------------------------------------
Interest received 19 19 35 33
----------------------------------------------------------------------------
Income taxes paid 117 82 181 113
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Included in investing activities
----------------------------------------------------------------------------
Interest paid 5 1 9 2
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Dividends of $0.225 per share were paid January 19, 2012 to
shareholders of record on January 1, 2012.
See accompanying notes.
AGRIUM INC.
Consolidated Balance Sheets
(Millions of U.S. dollars)
(Unaudited)
June 30, December 31,
----------------------------------------------------------------------------
2012 2011 (a) 2011
----------------------------------------------------------------------------
ASSETS
----------------------------------------------------------------------------
Current assets
----------------------------------------------------------------------------
Cash and cash equivalents 1,946 966 1,346
----------------------------------------------------------------------------
Accounts receivable 3,766 3,608 1,984
----------------------------------------------------------------------------
Income taxes receivable 15 - 138
----------------------------------------------------------------------------
Inventories 2,398 2,405 2,956
----------------------------------------------------------------------------
Prepaid expenses and deposits 144 197 643
----------------------------------------------------------------------------
Assets of discontinued
operations (note 3) - 269 70
----------------------------------------------------------------------------
8,269 7,445 7,137
----------------------------------------------------------------------------
Property, plant and equipment
(note 6) 3,014 2,300 2,533
----------------------------------------------------------------------------
Intangibles 645 657 678
----------------------------------------------------------------------------
Goodwill 2,290 2,282 2,277
----------------------------------------------------------------------------
Investments in associates 383 383 355
----------------------------------------------------------------------------
Other assets 54 72 97
----------------------------------------------------------------------------
Deferred income tax assets 59 28 63
----------------------------------------------------------------------------
14,714 13,167 13,140
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
----------------------------------------------------------------------------
Current liabilities
----------------------------------------------------------------------------
Short-term debt (note 7) 348 541 245
----------------------------------------------------------------------------
Accounts payable 3,348 3,014 2,959
----------------------------------------------------------------------------
Income taxes payable 197 111 82
----------------------------------------------------------------------------
Current portion of long-term
debt (note 7) 529 53 20
----------------------------------------------------------------------------
Current portion of other
provisions (note 6) 84 36 68
----------------------------------------------------------------------------
Liabilities of discontinued
operations (note 3) - 111 53
----------------------------------------------------------------------------
4,506 3,866 3,427
----------------------------------------------------------------------------
Long-term debt (note 7) 1,607 2,059 2,098
----------------------------------------------------------------------------
Provisions for post-employment
benefits 201 141 192
----------------------------------------------------------------------------
Other provisions (note 6) 390 324 299
----------------------------------------------------------------------------
Other liabilities 65 85 59
----------------------------------------------------------------------------
Deferred income tax liabilities 605 575 637
----------------------------------------------------------------------------
7,374 7,050 6,712
----------------------------------------------------------------------------
Shareholders' equity
----------------------------------------------------------------------------
Share capital 2,001 1,989 1,994
----------------------------------------------------------------------------
Retained earnings 5,338 4,014 4,420
----------------------------------------------------------------------------
Accumulated other
comprehensive (loss) income
(note 9) (4) 113 10
----------------------------------------------------------------------------
Equity holders of Agrium 7,335 6,116 6,424
----------------------------------------------------------------------------
Non-controlling interest 5 1 4
----------------------------------------------------------------------------
Total equity 7,340 6,117 6,428
----------------------------------------------------------------------------
14,714 13,167 13,140
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Certain amounts have been restated to reflect adjustments from the
finalization of the AWB Limited acquisition.
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Shareholders' Equity
(Millions of U.S. dollars, except share data)
(Unaudited)
Accumulated
Millions other
of comprehensive
common Share Retained income (loss)
shares (a) capital earnings (note 9)
----------------------------------------------------------------------------
December 31, 2010 158 1,982 3,134 69
----------------------------------------------------------------------------
Net earnings - - 889 -
----------------------------------------------------------------------------
Other comprehensive income
(loss)
----------------------------------------------------------------------------
Available for sale financial
instruments - - - (1)
----------------------------------------------------------------------------
Foreign currency translation - - - 44
----------------------------------------------------------------------------
Other comprehensive income of
associates - - - 1
----------------------------------------------------------------------------
Comprehensive income (loss) - - 889 44
----------------------------------------------------------------------------
Dividends ($0.055 per share) - - (9) -
----------------------------------------------------------------------------
Share-based payment transactions - 7 - -
----------------------------------------------------------------------------
June 30, 2011 158 1,989 4,014 113
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2011 158 1,994 4,420 10
----------------------------------------------------------------------------
Net earnings - - 1,013 -
----------------------------------------------------------------------------
Other comprehensive income
(loss)
----------------------------------------------------------------------------
Actuarial loss on post-
employment benefit plans - - (16) -
----------------------------------------------------------------------------
Foreign currency translation - - - (12)
----------------------------------------------------------------------------
Other comprehensive loss of
associates - - - (2)
----------------------------------------------------------------------------
Comprehensive income (loss) - - 997 (14)
----------------------------------------------------------------------------
Dividends ($0.50 per share) - - (79) -
----------------------------------------------------------------------------
Share-based payment transactions - 7 - -
----------------------------------------------------------------------------
June 30, 2012 158 2,001 5,338 (4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Authorized share capital consists of unlimited common shares without
par value and unlimited preferred shares.
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Shareholders' Equity
(Millions of U.S. dollars, except share data)
(Unaudited)
Equity
holders Non-
of controlling Total
Agrium interest equity
----------------------------------------------------------------------------
December 31, 2010 5,185 8 5,193
----------------------------------------------------------------------------
Net earnings 889 - 889
----------------------------------------------------------------------------
Other comprehensive income
(loss)
----------------------------------------------------------------------------
Available for sale financial
instruments (1) - (1)
----------------------------------------------------------------------------
Foreign currency translation 44 (7) 37
----------------------------------------------------------------------------
Other comprehensive income of
associates 1 - 1
----------------------------------------------------------------------------
Comprehensive income (loss) 933 (7) 926
----------------------------------------------------------------------------
Dividends ($0.055 per share) (9) - (9)
----------------------------------------------------------------------------
Share-based payment transactions 7 - 7
----------------------------------------------------------------------------
June 30, 2011 6,116 1 6,117
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2011 6,424 4 6,428
----------------------------------------------------------------------------
Net earnings 1,013 2 1,015
----------------------------------------------------------------------------
Other comprehensive income
(loss)
----------------------------------------------------------------------------
Actuarial loss on post-
employment benefit plans (16) - (16)
----------------------------------------------------------------------------
Foreign currency translation (12) (1) (13)
----------------------------------------------------------------------------
Other comprehensive loss of
associates (2) - (2)
----------------------------------------------------------------------------
Comprehensive income (loss) 983 1 984
----------------------------------------------------------------------------
Dividends ($0.50 per share) (79) - (79)
----------------------------------------------------------------------------
Share-based payment transactions 7 - 7
----------------------------------------------------------------------------
June 30, 2012 7,335 5 7,340
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Summarized Notes to the Consolidated Financial Statements
For the six months ended June 30, 2012
(Millions of U.S. dollars, except per share amounts)
(Unaudited)
1. Corporate Information
Corporate information
Agrium Inc. ("Agrium") is incorporated under the laws of Canada with common shares listed under the symbol "AGU" on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX). Agrium (with its subsidiaries) is a major retail supplier of agricultural products and services in North and South America, Australia and Europe and a leading global producer and marketer of agricultural nutrients and industrial products. We produce and market three primary groups of nutrients: nitrogen, phosphate and potash as well as controlled-release crop nutrients and micronutrients. Our Corporate head office is located at 13131 Lake Fraser Drive S.E. Calgary, Alberta, Canada. Our operations are conducted globally from our Wholesale head office in Calgary, and our Retail and Advanced Technologies head offices in Loveland, Colorado, U.S.
Agrium operates three strategic business units:
-- Retail operates in North and South America and Australia and sells crop
nutrients, crop protection products, seed and services directly to
growers.
-- Wholesale operates in North and South America and Europe producing,
marketing and distributing three primary groups of crop nutrients:
nitrogen, potash and phosphate for agricultural and industrial customers
around the world.
-- Advanced Technologies ("AAT") produces and markets controlled-release
crop nutrients and micronutrients in the broad-based agriculture,
specialty agriculture, professional turf, horticulture, and consumer
lawn and garden markets worldwide.
Basis of preparation and statement of compliance
These consolidated interim financial statements ("interim financial statements") were approved for issuance by the Audit Committee on August 2, 2012. We prepared these interim financial statements in accordance with IAS 34 Interim Financial Reporting. They do not include all information and disclosures normally provided in annual financial statements and should be read in conjunction with our audited annual financial statements and related notes contained in our 2011 Annual Report, available at www.agrium.com. We prepared these interim financial statements using the same accounting policies and critical accounting estimates we applied in our 2011 Annual Report.
Seasonality in our business results from increased demand for our products during planting seasons. Sales are generally higher in spring and fall.
2. Business Acquisition
On March 19, 2012, we signed an agreement with Glencore International plc ("Glencore") to acquire the majority of the Agri-products business of Viterra Inc. ("Viterra"), consisting of approximately 90 percent of Viterra's 258 Canadian farm centres; 17 Australian retail farm centres; a 34 percent interest in a nitrogen facility in Medicine Hat, Canada; storage and distribution assets; and other assets and liabilities (collectively the "Agrium Assets").
Key features of the agreement:
a. Agrium will acquire the Agrium Assets from Glencore after obtaining any
required consents to transfers and regulatory clearances. Shareholders
of Viterra approved the acquisition by Glencore on May 29, 2012.
Glencore received approval of its acquisition of Viterra under the
Investment Canada Act on July 15, 2012, however other regulatory
approvals remain outstanding. Agrium is responsible for obtaining
regulatory clearances for acquisition of the Agrium Assets. Should
Agrium not obtain regulatory clearance within the maximum 13-month time
frame specified in the agreement, the Agrium Assets may be sold or
transferred to it or a third party under a hold separate arrangement.
Accordingly, Agrium is exposed to the risk that the proceeds of any such
sale may be for an amount less than the portion of the purchase price
allocated to such assets. Agrium will not own or operate the assets
until acquisition of the Agrium Assets closes.
b. The acquisition price is subject to various terms and conditions
including adjustments for: approximately ten percent of Viterra's farm
centres excluded from the purchase; working capital; and the accrual to
Agrium of Viterra's operating cash flow on the agri-products assets from
March 31, 2012 to closing of Agrium's acquisition of the assets.
Following adjustment for the excluded farm centres, the purchase price
is expected to be approximately Cdn$1.65-billion, including estimated
working capital of Cdn$500-million.
c. Agrium has agreed to advance Cdn$1.775-billion to Glencore at the time
Glencore is first required to pay for Viterra shares. The advance is
guaranteed by Glencore, secured by shares of Viterra and does not bear
interest. The advance is repayable by the transfer of Viterra Agri-
products assets to Agrium and other purchase adjustments. Should Agrium
not obtain regulatory clearances or otherwise not be entitled to acquire
any of the Agrium Assets within the maximum time frames specified in the
agreement, Glencore will repay Agrium cash equal to the purchase price
allocated by the agreement to any assets not acquired, or the amount of
cash obtained by Glencore from any sale of assets to third parties. In
support of its obligation, Agrium has provided a letter of credit for
Cdn$85-million.
On August 2, 2012, Agrium and Glencore announced that CF Industries Holdings Inc. ("CF"), owner of a 66 percent interest in the Medicine Hat nitrogen facility, will acquire Viterra's 34 percent interest for Cdn$915-million. Accordingly, Agrium will not acquire an interest in the Medicine Hat facility. The agreement between Glencore and CF is subject to regulatory approval. Agrium will continue to receive the benefit of Viterra's operating cash flow on the Medicine Hat nitrogen facility from March 31, 2012 to closing of the purchase of Viterra's 34 percent interest by CF.
3.Discontinued Operations
Sales of the remaining AWB Limited ("AWB") operations sold in 2012 were $65-
million. Comparative figures for 2011 include operations of AWB businesses
sold in May 2011.
4. Expenses
Three months ended Six months ended
Other expenses June 30, June 30,
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
Realized loss on derivative
financial instruments 12 27 24 75
----------------------------------------------------------------------------
Unrealized gain on derivative
financial instruments (15) (15) (14) (45)
----------------------------------------------------------------------------
Interest income (19) (19) (35) (33)
----------------------------------------------------------------------------
Foreign exchange loss (gain) 12 (17) 12 (42)
----------------------------------------------------------------------------
Bad debt expense 16 22 24 27
----------------------------------------------------------------------------
Potash profit and capital tax 8 15 13 26
----------------------------------------------------------------------------
Other (9) 43 12 49
----------------------------------------------------------------------------
5 56 36 57
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Board of Directors granted 250,831 Performance Share Units on January 1,
2012 and 258,132 Tandem Stock Appreciation Rights with a grant price of
$88.27 on March 20, 2012 to officers and employees.
5. Earnings Per Share
Attributable to equity holders of Three months ended Six months ended
Agrium June 30, June 30,
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
Numerator
----------------------------------------------------------------------------
Net earnings from continuing
operations 860 727 1,013 888
----------------------------------------------------------------------------
Net (loss) earnings from
discontinued operations - (10) - 1
----------------------------------------------------------------------------
Net earnings for the period 860 717 1,013 889
----------------------------------------------------------------------------
Denominator (millions)
----------------------------------------------------------------------------
Weighted average number of shares
outstanding for basic earnings per
share 158 158 158 158
----------------------------------------------------------------------------
Dilutive instruments - stock
options - - - -
----------------------------------------------------------------------------
Weighted average number of shares
outstanding for diluted earnings
per share 158 158 158 158
----------------------------------------------------------------------------
----------------------------------------------------------------------------
On August 2, 2012, Agrium's Board of Directors authorized a Dutch auction substantial issuer bid (the "Bid"). Under the Bid, we will repurchase Cdn$900-million of our outstanding common shares.
6. Property, Plant and Equipment
During the six months ended June 30, 2012, we added $289-million to assets under construction at our Vanscoy Potash facility.
In March 2012, we recorded an asset retirement obligation for the phosphogypsum stack system at our Conda, Idaho phosphate facility. Included in the provision of $139-million are costs to address phosphogypsum stack decommissioning at the Conda facility, including post-closure monitoring. The provision was based on negotiations with government authorities, which are ongoing. Timing of the expenditures is contingent on, among other things, the completion of negotiations with government authorities, completion of engineering and planning for the work, and approval of engineering and planning by government authorities. Because various circumstances may affect the timing and amount of expenditures, we may change our provision as new information becomes available.
7.Debt
June 30, December 31,
----------------------------------------------------------------------------
2012 2011
----------------------------------------------------------------------------
Total Unutilized Utilized Utilized
----------------------------------------------------------------------------
Short-term debt
----------------------------------------------------------------------------
Multi-jurisdictional facility
expiring 2016 1,600 1,481 119 -
----------------------------------------------------------------------------
North American facilities
expiring 2012 - 2013 200 200 - -
----------------------------------------------------------------------------
European facilities expiring
2012 - 2013 317 146 171 178
----------------------------------------------------------------------------
South American facilities
expiring 2012 126 68 58 67
----------------------------------------------------------------------------
2,243 1,895 348 245
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Outstanding letters of credit 194 87
----------------------------------------------------------------------------
Remaining capacity available 1,701 158
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt
----------------------------------------------------------------------------
Floating rate bank loans due
2013 - 2016 33 35
----------------------------------------------------------------------------
Fixed and floating rate bank
loans due 2013 - 2014 117 95
----------------------------------------------------------------------------
Floating rate bank loans due
2013 460 460
----------------------------------------------------------------------------
6.125% debentures due 2041 500 500
----------------------------------------------------------------------------
6.75% debentures due 2019 500 500
----------------------------------------------------------------------------
7.125% debentures due 2036 300 300
----------------------------------------------------------------------------
7.7% debentures due 2017 100 100
----------------------------------------------------------------------------
7.8% debentures due 2027 125 125
----------------------------------------------------------------------------
Other 21 23
----------------------------------------------------------------------------
2,156 2,138
----------------------------------------------------------------------------
Unamortized transaction costs (20) (20)
----------------------------------------------------------------------------
Current portion of long-term
debt (529) (20)
----------------------------------------------------------------------------
1,607 2,098
----------------------------------------------------------------------------
----------------------------------------------------------------------------
In April 2012, we filed a base shelf prospectus in Canada and the U.S.
permitting the issuance of up to $2.5-billion of common shares, preferred
shares, subscription receipts, debt securities or units over the 25-month
period that the base shelf prospectus remains effective. The base shelf
replaced a base shelf prospectus that expired in 2011. We have not issued
securities under the base shelf prospectus.
8. Financial Instruments
Fair value of financial
instruments Level 1 Level 2 Total
----------------------------------------------------------------------------
June 30, 2012
----------------------------------------------------------------------------
Fair value through profit or
loss
----------------------------------------------------------------------------
Cash and cash equivalents 1,946 - 1,946
----------------------------------------------------------------------------
Gas, power and nutrient
derivative financial
instruments (24) 9 (15)
----------------------------------------------------------------------------
Available for sale 32 - 32
----------------------------------------------------------------------------
June 30, 2011
----------------------------------------------------------------------------
Fair value through profit or
loss
----------------------------------------------------------------------------
Cash and cash equivalents 966 - 966
----------------------------------------------------------------------------
Gas, power and nutrient
derivative financial
instruments (44) 10 (34)
----------------------------------------------------------------------------
Available for sale 10 - 10
----------------------------------------------------------------------------
December 31, 2011
----------------------------------------------------------------------------
Fair value through profit or
loss
----------------------------------------------------------------------------
Cash and cash equivalents 1,346 - 1,346
----------------------------------------------------------------------------
Foreign exchange derivative
financial instruments - (1) (1)
----------------------------------------------------------------------------
Gas, power and nutrient
derivative financial
instruments (38) 12 (26)
----------------------------------------------------------------------------
Available for sale 10 - 10
----------------------------------------------------------------------------
----------------------------------------------------------------------------
We do not measure any of our financial instruments using Level 3 inputs.
There have been no transfers between Level 1 and Level 2 fair value
measurements in the reporting period ended June 30, 2012.
9. Accumulated Other Comprehensive Income
Total
accumulated
Available for Foreign Comprehensive other
sale financial currency income (loss) comprehensive
instruments translation of associates income (loss)
----------------------------------------------------------------------------
December 31, 2010 - 69 - 69
----------------------------------------------------------------------------
Gains 1 67 1 69
----------------------------------------------------------------------------
Reclassification
to earnings (2) (23) - (25)
----------------------------------------------------------------------------
June 30, 2011 (1) 113 1 113
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2011 (1) 11 - 10
----------------------------------------------------------------------------
Losses - (12) (2) (14)
----------------------------------------------------------------------------
June 30, 2012 (1) (1) (2) (4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
10. Operating Segments
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
Sales
----------------------------------------------------------------------------
Retail
----------------------------------------------------------------------------
Crop nutrients 2,359 2,108 3,394 2,815
----------------------------------------------------------------------------
Crop protection products 1,727 1,465 2,561 2,103
----------------------------------------------------------------------------
Seed 712 687 1,028 917
----------------------------------------------------------------------------
Merchandise 157 208 287 352
----------------------------------------------------------------------------
Services and other 264 180 400 283
----------------------------------------------------------------------------
5,219 4,648 7,670 6,470
----------------------------------------------------------------------------
Wholesale
----------------------------------------------------------------------------
Nitrogen 743 717 1,127 1,051
----------------------------------------------------------------------------
Potash 246 259 385 454
----------------------------------------------------------------------------
Phosphate 224 206 413 444
----------------------------------------------------------------------------
Product purchased for resale 409 449 830 860
----------------------------------------------------------------------------
Other 95 82 174 137
----------------------------------------------------------------------------
1,717 1,713 2,929 2,946
----------------------------------------------------------------------------
Advanced Technologies 178 158 313 239
----------------------------------------------------------------------------
Other (280) (321) (449) (503)
----------------------------------------------------------------------------
6,834 6,198 10,463 9,152
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Inter-segment sales
----------------------------------------------------------------------------
Retail 9 12 15 18
----------------------------------------------------------------------------
Wholesale 248 275 385 436
----------------------------------------------------------------------------
Advanced Technologies 23 34 49 49
----------------------------------------------------------------------------
280 321 449 503
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings
----------------------------------------------------------------------------
Retail 556 486 613 471
----------------------------------------------------------------------------
Wholesale 634 569 960 946
----------------------------------------------------------------------------
Advanced Technologies 14 13 9 8
----------------------------------------------------------------------------
Other 20 (20) (112) (118)
----------------------------------------------------------------------------
Earnings before finance costs and
income taxes 1,224 1,048 1,470 1,307
----------------------------------------------------------------------------
Finance costs related to long-term
debt 22 24 44 51
----------------------------------------------------------------------------
Other finance costs 10 12 20 25
----------------------------------------------------------------------------
Earnings before income taxes 1,192 1,012 1,406 1,231
----------------------------------------------------------------------------
Income taxes 332 284 391 343
----------------------------------------------------------------------------
Net earnings from continuing
operations 860 728 1,015 888
----------------------------------------------------------------------------
Net (loss) earnings from
discontinued operations - (10) - 1
----------------------------------------------------------------------------
Net earnings 860 718 1,015 889
----------------------------------------------------------------------------
----------------------------------------------------------------------------
June 30, December 31,
----------------------------------------------------------------------------
2012 2011
----------------------------------------------------------------------------
Total assets
----------------------------------------------------------------------------
Retail 8,615 7,685
----------------------------------------------------------------------------
Wholesale 3,522 2,997
----------------------------------------------------------------------------
Advanced Technologies 485 474
----------------------------------------------------------------------------
Other 2,092 1,914
----------------------------------------------------------------------------
Discontinued operations - 70
----------------------------------------------------------------------------
14,714 13,140
----------------------------------------------------------------------------
----------------------------------------------------------------------------
AGRIUM INC.
Results by Segment
(Unaudited - millions of U.S. dollars)
Schedule 1a
Three months ended June 30,
----------------------------------------------------------------------------
2012
----------------------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Total
----------------------------------------------------------------------------
Sales - external 5,210 1,469 155 - 6,834
- inter-segment 9 248 23 (280) -
----------------------------------------------------------------------------
Total sales 5,219 1,717 178 (280) 6,834
Cost of product sold 4,115 1,044 142 (337) 4,964
----------------------------------------------------------------------------
Gross profit 1,104 673 36 57 1,870
----------------------------------------------------------------------------
Gross profit (%) 21 39 20 27
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Selling expenses 520 10 14 (3) 541
EBITDA(1) 605 686 20 24 1,335
EBIT(2) 556 634 14 20 1,224
Three months ended June 30,
----------------------------------------------------------------------------
2011
----------------------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Total
----------------------------------------------------------------------------
Sales - external 4,636 1,438 124 - 6,198
- inter-segment 12 275 34 (321) -
----------------------------------------------------------------------------
Total sales 4,648 1,713 158 (321) 6,198
Cost of product sold 3,652 1,093 121 (343) 4,523
----------------------------------------------------------------------------
Gross profit 996 620 37 22 1,675
----------------------------------------------------------------------------
Gross profit (%) 21 36 23 27
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Selling expenses 473 8 10 (3) 488
EBITDA(1) 529 617 18 (19) 1,145
EBIT(2) 486 569 13 (20) 1,048
(1) Earnings (loss) from continuing operations before finance costs, income
taxes, depreciation and amortization.
(2) Earnings (loss) from continuing operations before finance costs and
income taxes.
AGRIUM INC.
Results by Segment
(Unaudited - millions of U.S. dollars)
Schedule 1b
Six months ended June 30,
----------------------------------------------------------------------------
2012
----------------------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Total
----------------------------------------------------------------------------
Sales - external 7,655 2,544 264 - 10,463
- inter-segment 15 385 49 (449) -
----------------------------------------------------------------------------
Total sales 7,670 2,929 313 (449) 10,463
Cost of product sold 6,139 1,897 256 (499) 7,793
----------------------------------------------------------------------------
Gross profit 1,531 1,032 57 50 2,670
----------------------------------------------------------------------------
Gross profit (%) 20 35 18 26
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Selling expenses 870 20 27 (6) 911
EBITDA(1) 706 1,048 22 (104) 1,672
EBIT(2) 613 960 9 (112) 1,470
Six months ended June 30,
----------------------------------------------------------------------------
2011
----------------------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Total
----------------------------------------------------------------------------
Sales - external 6,452 2,510 190 - 9,152
- inter-segment 18 436 49 (503) -
----------------------------------------------------------------------------
Total sales 6,470 2,946 239 (503) 9,152
Cost of product sold 5,134 1,917 186 (485) 6,752
----------------------------------------------------------------------------
Gross profit 1,336 1,029 53 (18) 2,400
----------------------------------------------------------------------------
Gross profit (%) 21 35 22 26
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Selling expenses 808 19 19 (5) 841
EBITDA(1) 554 1,029 19 (112) 1,490
EBIT(2) 471 946 8 (118) 1,307
(1) Earnings (loss) from continuing operations before finance costs, income
taxes, depreciation and amortization.
(2) Earnings (loss) from continuing operations before finance costs and
income taxes.
AGRIUM INC.
Product Lines
(Unaudited - millions of U.S. dollars)
Schedule 2
Three months ended June 30,
----------------------------------------------------------------------------
2012 2011
----------------------------------------------------------------------------
Cost of Cost of
product Gross product Gross
Sales sold(1) profit Sales sold(1) profit
----------------------------------------------------------------------------
Retail(2)
Crop nutrients 2,359 1,959 400 2,108 1,731 377
Crop protection products 1,727 1,327 400 1,465 1,140 325
Seed 712 587 125 687 555 132
Merchandise 157 125 32 208 181 27
Services and other 264 117 147 180 45 135
----------------------------------------------------------------------------
5,219 4,115 1,104 4,648 3,652 996
----------------------------------------------------------------------------
Wholesale
Nitrogen 743 312 431 717 393 324
Potash 246 93 153 259 94 165
Phosphate 224 182 42 206 123 83
Product purchased for
resale 409 392 17 449 427 22
Other 95 65 30 82 56 26
----------------------------------------------------------------------------
1,717 1,044 673 1,713 1,093 620
----------------------------------------------------------------------------
Advanced Technologies
Turf and ornamental 105 87 18 91 75 16
Agriculture 73 55 18 67 46 21
----------------------------------------------------------------------------
178 142 36 158 121 37
----------------------------------------------------------------------------
Other inter-segment
eliminations (280) (337) 57 (321) (343) 22
----------------------------------------------------------------------------
Total 6,834 4,964 1,870 6,198 4,523 1,675
----------------------------------------------------------------------------
----------------------------------------------------------------------------
AGRIUM INC.
Product Lines
(Unaudited - millions of U.S. dollars)
Schedule 2
Six months ended June 30,
----------------------------------------------------------------------------
2012 2011
----------------------------------------------------------------------------
Cost of Cost of
product Gross product Gross
Sales sold(1) profit Sales sold(1) profit
----------------------------------------------------------------------------
Retail(2)
Crop nutrients 3,394 2,839 555 2,815 2,323 492
Crop protection products 2,561 2,038 523 2,103 1,676 427
Seed 1,028 859 169 917 750 167
Merchandise 287 232 55 352 308 44
Services and other 400 171 229 283 77 206
----------------------------------------------------------------------------
7,670 6,139 1,531 6,470 5,134 1,336
----------------------------------------------------------------------------
Wholesale
Nitrogen 1,127 529 598 1,051 576 475
Potash 385 145 240 454 164 290
Phosphate 413 308 105 444 266 178
Product purchased for
resale 830 801 29 860 822 38
Other 174 114 60 137 89 48
----------------------------------------------------------------------------
2,929 1,897 1,032 2,946 1,917 1,029
----------------------------------------------------------------------------
Advanced Technologies
Turf and ornamental 184 153 31 143 116 27
Agriculture 129 103 26 96 70 26
----------------------------------------------------------------------------
313 256 57 239 186 53
----------------------------------------------------------------------------
Other inter-segment
eliminations (449) (499) 50 (503) (485) (18)
----------------------------------------------------------------------------
Total 10,463 7,793 2,670 9,152 6,752 2,400
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Includes depreciation and amortization.
(2) International Retail net sales were $814-million (2011 - $858-million)
and gross profit was $130-million (2011 - $141-million) for the three
months ended June 30. International Retail net sales were $1,399-million
(2011 - $1,433-million) and gross profit was $239-million (2011 - $249-
million) for the six months ended June 30.
AGRIUM INC.
Selected Wholesale Volumes and Sales Prices
(Unaudited)
Schedule 3a
Three months ended June 30,
----------------------------------------------------------------------------
2012
----------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's) ($/tonne) ($/tonne) ($/tonne)
----------------------------------------------------------------------------
Nitrogen
Domestic
Ammonia 420 680
Urea 418 636
Other 378 387
--------------------------------------------------------
Total domestic 1,216 574
International 81 567
----------------------------------------------------------------------------
Total nitrogen 1,297 573 241 332
----------------------------------------------------------------------------
Potash
Domestic 285 539
International 227 406
----------------------------------------------------------------------------
Total potash 512 480 181 299
----------------------------------------------------------------------------
Phosphate 313 713 581 132
Product purchased for resale 866 472 452 20
Other
Ammonium sulfate 85 443 242 201
Other 118
----------------------------------------------------------------------------
Total other 203
----------------------------------------------------------------------------
Total Wholesale 3,191 538 327 211
----------------------------------------------------------------------------
----------------------------------------------------------------------------
AGRIUM INC.
Selected Wholesale Volumes and Sales Prices
(Unaudited)
Schedule 3a
Three months ended June 30,
----------------------------------------------------------------------------
2011
----------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's) ($/tonne) ($/tonne) ($/tonne)
----------------------------------------------------------------------------
Nitrogen
Domestic
Ammonia 410 620
Urea 508 516
Other 381 367
--------------------------------------------------------
Total domestic 1,299 504
International 134 463
----------------------------------------------------------------------------
Total nitrogen 1,433 500 274 226
----------------------------------------------------------------------------
Potash
Domestic 316 547
International 227 374
----------------------------------------------------------------------------
Total potash 543 477 173 304
----------------------------------------------------------------------------
Phosphate 259 795 475 320
Product purchased for resale 1,014 443 421 22
Other
Ammonium sulfate 89 382 180 202
Other 99
----------------------------------------------------------------------------
Total other 188
----------------------------------------------------------------------------
Total Wholesale 3,437 499 319 180
----------------------------------------------------------------------------
----------------------------------------------------------------------------
AGRIUM INC.
Selected Wholesale Volumes and Sales Prices
(Unaudited)
Schedule 3b
Six months ended June 30,
----------------------------------------------------------------------------
2012
----------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's) ($/tonne) ($/tonne) ($/tonne)
----------------------------------------------------------------------------
Nitrogen
Domestic
Ammonia 646 624
Urea 689 599
Other 609 376
--------------------------------------------------------
Total domestic 1,944 537
International 158 522
----------------------------------------------------------------------------
Total nitrogen 2,102 536 252 284
----------------------------------------------------------------------------
Potash
Domestic 447 550
International 344 403
----------------------------------------------------------------------------
Total potash 791 486 182 304
----------------------------------------------------------------------------
Phosphate 556 742 554 188
Product purchased for resale 1,755 473 457 16
Other
Ammonium sulfate 171 432 221 211
Other 198
----------------------------------------------------------------------------
Total other 369
----------------------------------------------------------------------------
Total Wholesale 5,573 526 341 185
----------------------------------------------------------------------------
----------------------------------------------------------------------------
AGRIUM INC.
Selected Wholesale Volumes and Sales Prices
(Unaudited)
Schedule 3b
Six months ended June 30,
----------------------------------------------------------------------------
2011
----------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's) ($/tonne) ($/tonne) ($/tonne)
----------------------------------------------------------------------------
Nitrogen
Domestic
Ammonia 568 581
Urea 808 509
Other 589 358
--------------------------------------------------------
Total domestic 1,965 484
International 217 456
----------------------------------------------------------------------------
Total nitrogen 2,182 482 264 218
----------------------------------------------------------------------------
Potash
Domestic 528 536
International 492 346
----------------------------------------------------------------------------
Total potash 1,020 445 161 284
----------------------------------------------------------------------------
Phosphate 565 786 471 315
Product purchased for resale 1,925 447 427 20
Other
Ammonium sulfate 177 356 175 181
Other 167
----------------------------------------------------------------------------
Total other 344
----------------------------------------------------------------------------
Total Wholesale 6,036 488 318 170
----------------------------------------------------------------------------
----------------------------------------------------------------------------
AGRIUM INC.
Depreciation and Amortization in Cost of Product Sold
(Unaudited - millions of U.S. dollars)
Schedule 4
Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
Retail 2 2 3 3
----------------------------------------------------------------------------
Wholesale
Nitrogen 22 25 38 37
Potash 13 11 19 20
Phosphate 15 9 27 21
Product purchased for resale 1 - 1 -
Other 1 1 2 2
----------------------------------------------------------------------------
52 46 87 80
----------------------------------------------------------------------------
Advanced Technologies 3 3 7 7
----------------------------------------------------------------------------
Total 57 51 97 90
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Contacts:
Agrium Inc.
Richard Downey
Vice President, Investor & Corporate Relations
(403) 225-7357
Agrium Inc.
Todd Coakwell
Manager, Investor Relations
(403) 225-7437
Agrium Inc.
Mark Thompson
Analyst, Investor Relations
(403) 225-7761
www.agrium.com