CALGARY, ALBERTA -- (Marketwired) -- 08/05/15 -- ALL AMOUNTS ARE STATED IN U.S.$
Agrium Inc. (TSX: AGU) (NYSE: AGU) announced today 2015 second quarter net earnings from continuing operations of $675-million ($4.71 diluted earnings per share), compared to $625-million ($4.34 diluted earnings per share) in the second quarter of 2014. The increase in earnings was supported by higher Wholesale volumes and lower production costs for most products. Retail results were impacted by lower crop prices, drought in Western Canada and wet conditions in the U.S. Corn Belt, which affected growers' decisions and limited the opportunities for use of certain crop inputs and services.
Highlights:
-- Second quarter adjusted net earnings of $701-million or $4.90 per share
and $5.01 per share in the first half of 2015 on the same basis (see
page 2 for adjusted net earnings reconciliation)(1).
-- Strong nitrogen operational performance contributed to Wholesale gross
profit of $409-million compared to $227-million in the second quarter of
2014. Our total ammonia production for the first half of 2015 was the
highest since 2000.
-- The Vanscoy potash facility continues to ramp-up production after
completion of the expansion project and is hitting new daily production
targets.
-- Retail gross profit of $1.3-billion was 6 percent lower than the second
quarter of 2014. Results were primarily impacted by lower earnings in
Canadian retail and the lower Canadian dollar, as well as compression of
seed margins across all regions.
-- Repurchased $100-million or 952,053 shares since the beginning of April.
-- 2015 annual guidance range narrowed to $7.00 to $7.50 diluted earnings
per share (see page 3 for further detail).
-- Revision to timeline and scope of Borger nitrogen expansion project.
-- Agrium has exceeded its 2017 Operational Excellence targets of $350-
million of one-time savings and $125-million of recurring EBITDA value
through primarily our portfolio review, utilization rates, distribution
network synergies, and cost reductions.
"Agrium's solid second quarter earnings were supported by the strong competitive advantages across our product portfolio, the diversity of our product and geographic mix and our continued focus on operational excellence. Wholesale delivered impressive results across all products, supported by lower costs and higher volumes. Retail earnings held up well despite approximately a 5 percent decline in crop input expenditures across the North America market and the impact of the severe weather conditions across this region. We believe we outperformed against our U.S. retail peers achieving an increase in U.S. normalized comparable store sales in a down market, a demonstration of the strength of our business model and market position," commented Chuck Magro, Agrium's President and CEO.
"Agrium is committed to delivering on our capital allocation vision as we execute our Operational Excellence initiatives, optimize our portfolio and continue to return capital to shareholders through future dividend growth and share repurchases," added Mr. Magro.
(1) Forecasted annual effective tax rate of 28 percent used for adjusted net earnings and per share calculations. These are non-IFRS measures which represent net earnings adjusted for certain income (expenses) that are considered to be non-operational in nature. We believe these measures provide meaningful comparison to the earnings of other companies by eliminating share-based payments expense (recovery), gains (losses) on foreign exchange, gains (losses) on non-qualifying derivative hedges and other one-time adjustments. These should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS and may not be directly comparable to similar measures presented by other companies.
ADJUSTED NET EARNINGS RECONCILIATION
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Three months ended
June 30, 2015
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Net earnings
(millions of U.S. dollars, Expense impact
except per share amounts) (post-tax) Per share(1)
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675 4.71
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Adjustments:
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Share-based payments expense 6 4 0.03
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Loss on derivatives net of
foreign exchange 1 1 0.01
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Gain on sale of Purchase for
Resale assets - - -
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One-time tax adjustment(2) 21 21 0.15
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Adjusted net earnings(3) 701 4.90
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Six months ended
June 30, 2015
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Net earnings
(millions of U.S. dollars, Expense impact
except per share amounts) (income) (post-tax) Per share(1)
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689 4.78
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Adjustments:
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Share-based payments expense 51 37 0.27
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Loss on derivatives net of
foreign exchange - - -
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Gain on sale of Purchase for
Resale assets (38) (28) (0.19)
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One-time tax adjustment(2) 21 21 0.15
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Adjusted net earnings(3) 719 5.01
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UPDATED ANNUAL 2015 GUIDANCE
Based on our Market Outlook, Agrium expects to achieve annual diluted earnings per share of $7.00 to $7.50 in 2015 compared to our previous estimate of $7.00 to $8.25 per share. We have narrowed the guidance range due primarily to the impact of low crop prices on grower decisions and lower expected potash and phosphate pricing in the second half of the year relative to our previous guidance. We are assuming a normal fall season, recognizing there is risk to fall nutrient applications in regions impacted by drought or a delay in the North American harvest. As a result, our Retail EBITDA(4) for 2015 is now expected to be from $1.00-billion to $1.05-billion. This incorporates challenges that our Canadian retail operations face in 2015 due to the drought and lower crop prices, while our U.S. Retail operations is expected to achieve earnings in-line with 2014 levels.
Our annual nitrogen and potash production targets remain unchanged. However, strong sales in the second quarter resulted in low beginning inventories to start the third quarter, which will impact sales volumes in this period.
We have updated our finance costs range for 2015 to $240-million to $255-million to reflect a higher than anticipated cost of financing for our customer pre-payment programs. Our estimates of the Canada and U.S. foreign exchange rates and NYMEX for 2015 have been narrowed from our previous estimates based on current market conditions.
We have also updated the range for our annual effective tax rate for 2015 to 28 percent to 29 percent to reflect the impact of the recently announced increase to the Alberta corporate income tax rate effective July 1, 2015, increasing from 10 percent to 12 percent. As a result, we had a one-time deferred tax liability charge in the second quarter, which contributed to the increase in our annual effective tax rate for 2015.
This guidance and updated additional measures and related assumptions are summarized in the table on page 3. Guidance excludes the impact of share-based payments expense (recovery), gains (losses) on foreign exchange and non-qualifying derivative hedges.(5)
(1) Represents diluted per share information attributable to equity holders of Agrium.
(2) One-time adjustment mainly relates to the increase in current and deferred taxes due to an increase in the Alberta corporate income tax rate.
(3) Forecasted annual effective tax rate of 28 percent used for adjusted net earnings and per share calculations.
(4) Earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization. This is a non-IFRS measure. Refer to section "Additional IFRS and non-IFRS Financial Measures" in the Management's Discussion and Analysis.
(5) For further assumptions related to our guidance, see disclosure in the section "Market Outlook" in our 2015 second quarter Management's Discussion and Analysis.
2015 ANNUAL GUIDANCE RANGE AND ASSUMPTIONS
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Annual
Low High
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Diluted EPS $7.00 $7.50
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Guidance assumptions:
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Wholesale:
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Production tonnes:
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Nitrogen (millions)(1) 3.5 3.7
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Potash (millions) 1.9 2.2
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Retail:
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EBITDA (millions) $1,000 $1,050
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Crop nutrient sales tonnes (millions) 9.7 10.2
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Other:
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Finance costs (millions) $255 $240
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Tax rate 29% 28%
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Sustaining capital expenditures (millions) $500 $550
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Total capital expenditures (billions) $1.2 $1.3
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Canada/U.S. foreign exchange rate 1.24 1.28
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NYMEX gas price ($/MMBtu) $3.25 $2.75
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(1) Nitrogen production tonnes reduced to reflect disposal of West Sacramento upgrade facility.
MANAGEMENT'S DISCUSSION AND ANALYSIS
August 5, 2015
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 2015 (three months ended June 30, 2015) and for the six months ended June 30, 2015 are against results for the second quarter of 2014 (three months ended June 30, 2014) and six months ended June 30, 2014. All dollar amounts refer to United States ("U.S.") dollars except where otherwise stated. The financial measures EBITDA, Adjusted EBITDA, and cash cost of product manufactured used in this MD&A are not prescribed by IFRS, or in the case of EBIT, is an Additional IFRS financial measure. Our method of calculation may not be directly comparable to that of other companies. We consider these non-IFRS and additional IFRS financial measures to provide useful information to both management and investors in measuring our financial performance and financial condition. These non-IFRS measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS. Please refer to the section entitled "Additional IFRS and Non-IFRS Financial Measures" of this MD&A for further details, including a reconciliation of such measures to their most directly comparable measure calculated in accordance with IFRS.
The following interim MD&A is as of August 5, 2015 and should be read in conjunction with the Consolidated Interim Financial Statements for the three and six months ended June 30, 2015 (the "Consolidated Financial Statements"), and the annual MD&A and financial statements for the year ended December 31, 2014 included in our 2014 Annual Report to Shareholders. 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 this disclosure, pursuant to the authority delegated to it by the Board of Directors. No update is provided to the disclosure in our annual MD&A where there has been no material change from the discussion in our annual MD&A. In respect of Forward-Looking Statements, please refer to the section entitled "Forward-Looking Statements" after the "Market Outlook" section of this MD&A.
2015 Second Quarter Operating Results
CONSOLIDATED NET EARNINGS
Agrium's 2015 second quarter net earnings from continuing operations were $675-million or $4.71 diluted earnings per share from continuing operations compared to net earnings from continuing operations of $625-million or $4.34 diluted earnings per share from continuing operations for the same quarter of 2014.
Financial Overview
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Three months ended June 30,
(millions of U.S. dollars, except
per share amounts and where noted) 2015 2014 Change % Change
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Sales 6,992 7,338 (346) (5)
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Gross profit 1,708 1,599 109 7
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Expenses 682 704 (22) (3)
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Earnings before finance costs and
income taxes ("EBIT") 1,026 895 131 15
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Net earnings from continuing
operations 675 625 50 8
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Net loss from discontinued
operations - (9) 9 (100)
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Net earnings 675 616 59 10
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Diluted earnings per share from
continuing operations 4.71 4.34 0.37 9
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Diluted loss per share from
discontinued operations - (0.06) 0.06 (100)
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Diluted earnings per share 4.71 4.28 0.43 10
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Effective tax rate (%) 30 28 N/A N/A
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Financial Overview
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Six months ended June 30,
(millions of U.S. dollars, except
per share amounts and where noted) 2015 2014 Change % Change
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Sales 9,864 10,417 (553) (5)
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Gross profit 2,292 2,155 137 6
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Expenses 1,191 1,207 (16) (1)
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Earnings before finance costs and
income taxes ("EBIT") 1,101 948 153 16
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Net earnings from continuing
operations 689 637 52 8
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Net loss from discontinued
operations - (18) 18 (100)
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Net earnings 689 619 70 11
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Diluted earnings per share from
continuing operations 4.78 4.42 0.36 8
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Diluted loss per share from
discontinued operations - (0.13) 0.13 (100)
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Diluted earnings per share 4.78 4.29 0.49 11
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Effective tax rate (%) 29 28 N/A N/A
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Sales and Gross Profit
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Three months ended June 30, Six months ended June 30,
(millions of U.S.
dollars) 2015 2014 Change 2015 2014 Change
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Sales
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Retail 6,160 6,397 (237) 8,423 8,629 (206)
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Wholesale 1,174 1,212 (38) 2,041 2,273 (232)
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Other (342) (271) (71) (600) (485) (115)
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6,992 7,338 (346) 9,864 10,417 (553)
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Gross profit
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Retail 1,264 1,349 (85) 1,635 1,736 (101)
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Wholesale 409 227 182 643 398 245
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Other 35 23 12 14 21 (7)
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1,708 1,599 109 2,292 2,155 137
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Sales and gross profit
-- Retail sales and gross profit decreased for the second quarter and first
half of 2015 compared to the same periods last year primarily due to
unfavorable weather conditions and competitive pricing pressure as a
result of lower crop prices and reduced U.S. corn acreage which impacted
our crop nutrients and seed sales and margins.
-- Wholesale's nitrogen and phosphate sales and gross profit increased for
the second quarter and first half of 2015 compared to the same periods
last year as a result of higher nitrogen volumes, higher ammonia and
phosphate realized selling prices, lower natural gas costs and
manufacturing cost efficiencies. Product purchased for resale had lower
sales and gross profit as a result of the 2014 strategic review that led
to Agrium exiting portions of this business. Overall, Wholesale had
higher gross profit for the second quarter and first half of 2015
compared to the same periods last year.
Expenses
-- General and administrative expense decreased by $16-million for the
second quarter and $18-million for the first half of 2015 compared to
the same periods last year as a result of reduced payroll and office
expense costs as we began to realize reductions related to our
Operational Excellence program.
Share-based payments
-- Due primarily to Agrium's share price increases in 2015, our share-based
payments expense increased by $22-million for the second quarter and
$36-million for the first half of 2015 compared to the same periods last
year.
Other Expenses (Income)
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Three months ended Six months ended
June 30, June 30,
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(millions of U.S. dollars) 2015 2014 2015 2014
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Loss (gain) on derivatives not
designated as hedges net of foreign
exchange 1 (2) - (37)
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Interest income (16) (19) (33) (30)
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Gain on sale of assets - - (38) -
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Environmental remediation and asset
retirement obligations - 22 9 20
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Bad debt expense 25 25 32 30
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Potash profit and capital tax 5 3 10 6
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Other 11 13 13 13
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26 42 (7) 2
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-- We began to designate all of our natural gas derivatives as qualifying
hedges for accounting purposes beginning January 1, 2015 and,
accordingly, we no longer have natural gas derivatives not designated as
hedges. The related gains or losses are recorded as part of cost of
product sold when we sell the related product and unrealized gains or
losses are recorded in equity. Previously, we recorded these natural gas
derivative gains and losses directly to other expenses, resulting in
natural gas derivative gains of $32-million in the first half of 2014.
-- We completed the sale of our Niota and Meredosia storage and
distribution facilities in the first quarter of 2015 resulting in a gain
on sale of assets of $38-million.
-- Environmental remediation and asset retirement obligations expense
decreased for the second quarter and first half of 2015 compared to the
same periods last year as higher provisions were recorded for our plant
and mine sites in 2014.
Effective Tax Rate
-- The effective tax rates on continuing operations were 30 percent for the
second quarter and 29 percent for the first half of 2015 and are higher
than the effective tax rate of 28 percent for both the second quarter
and first half of last year due to an increase in deferred taxes
relating to the increase in the Alberta corporate income tax rate.
BUSINESS SEGMENT PERFORMANCE
Retail
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Three months ended June 30,
(millions of U.S. dollars, except where noted) 2015 2014 Change
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Sales 6,160 6,397 (237)
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Cost of product sold 4,896 5,048 (152)
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Gross profit 1,264 1,349 (85)
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EBITDA 713 791 (78)
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Selling expense as a percentage of sales (%) 9 9 -
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-- Retail sales and gross profit were lower than the same period last year
due to lower prices for all crops this spring and reduced corn acreage
in the U.S. North American operations were also impacted by the drought
in Western Canada and California and excessive moisture across the U.S.
Corn Belt and the southern and northeastern states during June. The wet
conditions in the U.S. Corn Belt impacted total seeded acreage and the
ability of growers to apply nutrients and crop protection products in
late spring.
-- Regionally, the U.S. EBITDA contribution was lower by $12-million over
the same period last year, while South America was also lower. Canadian
results accounted for the majority of the variance in EBITDA compared to
the second quarter of 2014, while Australia was the only region to
report an increase in EBITDA this quarter.
-- Retail selling expenses as a percentage of sales were unchanged year-
over-year on realization of Operational Excellence initiatives.
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Three months ended June 30,
Sales Gross profit Margin (%)
------------------- ------------------- ------------
(millions of U.S.
dollars, except where
noted) 2015 2014 Change 2015 2014 Change 2015 2014
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Crop nutrients 2,608 2,708 (100) 454 505 (51) 17.4 18.6
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Crop protection products 2,169 2,199 (30) 457 457 - 21.1 20.8
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Seed 982 1,038 (56) 164 196 (32) 16.7 18.9
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Merchandise 174 218 (44) 27 24 3 15.5 11.0
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Service and other 227 234 (7) 162 167 (5) 71.4 71.4
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Crop nutrients
-- Total nutrient sales were 4 percent lower compared to the same period
last year, primarily due to lower average nutrient selling prices.
-- Total nutrient volumes were 1 percent lower this quarter across our
Retail operations compared to the same period last year. Virtually all
of the reduction was due to lower demand in Canada related to drought
conditions and lower crop prices. Nutrient sales volumes in the U.S.
were up 2 percent this quarter, despite lower corn and total seeded
acreage this year. Nutrient sales volumes were marginally lower in our
international markets due to dry conditions and lower planted wheat
acreage in both our South American and Australian markets.
-- Nutrient margins on a per tonne basis were lower across all regions,
with the largest decline in Canada, but only a 4 percent reduction in
the U.S. and Australia compared to the same quarter last year. The
significant weakening in the Canadian dollar in 2015 had an estimated
$10/tonne negative impact on nutrient margins in our Canadian
operations.
Crop protection products
-- Total crop protection sales were down 1 percent year-over-year, mostly
as a result of dry conditions in Australia and South America and foreign
exchange differences in the businesses outside of the U.S.
-- North American crop protection sales increased slightly compared to last
year, despite significant industry headwinds this spring. The increase
was a result of higher herbicide and insecticide sales in our U.S.
operations despite the wet conditions during June across the U.S. Corn
Belt.
-- Crop protection margins as a percentage of sales increased year-over-
year, largely due to the strength of the performance from our Loveland
proprietary product line, which registered over a 10 percent increase in
sales this quarter and gained a further 2 percentage points increase in
the proportion of Loveland's sales out of our total crop protection
sales.
Seed
-- The lower crop price environment this spring had the largest impact on
the seed business. Seed sales and margins were negatively impacted by
competitive pressures between suppliers and some trading down by growers
in terms of seed genetics. The reduction was also due to a shift in crop
mix from corn and cotton to soybeans, as well as significant unseeded
soybean acreage in the U.S. due to the wet weather later this spring.
-- Seed margins as a percentage of sales decreased by 2 percent from the
second quarter of 2014; however, higher margin Dyna-Gro seed sales
showed a year-over-year increase in sales which helped mitigate some of
the impact on seed results.
Merchandise
-- Merchandise sales decreased compared to the same period last year as a
result of lower fuel prices and lower equipment sales in Canadian retail
and lower merchandise sales in Australia as part of our stock keeping
unit ("SKU") rationalization, which has had a positive impact on
Australian working capital leverage.
-- Gross profit and gross margin as a percentage of sales were higher this
quarter due to a decrease in lower margin Canadian fuel sales and higher
overall product prices in the Australian business which consistently has
higher margin products.
Services and other
-- Sales and gross profit for application services and other were both down
3 percent compared to the same period last year. The decline was due to
reduction in the Canadian and Australian markets related to dry weather
conditions.
Wholesale
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Three months ended June 30,
(millions of U.S. dollars, except where
noted) 2015 2014 Change
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Sales 1,174 1,212 (38)
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Sales volumes (tonnes 000's) 2,644 2,780 (136)
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Cost of product sold 765 985 (220)
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Gross profit 409 227 182
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Adjusted EBITDA 438 263 175
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Expenses 29 36 (7)
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-- Wholesale sales this quarter were slightly lower than the same period
last year due primarily to our decision to scale back the majority of
our product purchased for resale business and lower prices for nitrogen
products. However, Adjusted EBITDA increased 67 percent over the same
period last year primarily due to strong nitrogen results stemming from
higher production volumes, a significant decline in cost of product sold
and a 35 percent increase in sales volumes.
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Three months ended June 30,
Nitrogen Potash Phosphate
----------------- ---------------- ------------------
2015 2014 Change 2015 2014 Change 2015 2014 Change
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Gross profit (U.S.
dollars millions) 270 101 169 68 72 (4) 29 6 23
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Sales volumes (tonnes
000's) 1,223 906 317 509 566 (57) 290 268 22
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Selling price ($/tonne) 451 464 (13) 327 310 17 665 598 67
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Cost of product sold
($/tonne) 231 353 (122) 193 182 11 563 576 (13)
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Gross margin ($/tonne) 220 111 109 134 128 6 102 22 80
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Nitrogen
-- Nitrogen gross profit increased 167 percent compared to the same period
last year due to higher sales volumes and lower cost of product sold.
This was partially offset by lower urea and UAN prices in the current
quarter.
-- Sales volumes increased by 35 percent over the same period last year due
to stronger operating rates and a greater draw-down in inventories this
year.
-- Cost of product sold for nitrogen decreased from the second quarter of
2014. The reduction in per tonne costs was primarily due to
significantly lower natural gas prices, stronger operating rates and the
weaker Canadian dollar.
-- Nitrogen margins reached $220 per tonne this quarter, almost double last
year's level.
Natural gas prices: North American indices and North American Agrium prices
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Three months ended June 30,
(U.S. dollars per MMBtu) 2015 2014
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Overall gas cost excluding realized derivative
impact $2.34 $4.49
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Overall gas cost $2.39 $4.51
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Average NYMEX $2.67 $4.56
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Average AECO $2.16 $4.26
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As of January 1, 2015, we have designated all of our natural gas derivatives as hedges(1), with realized gains and losses now recorded to cost of product sold (which also includes transportation and administration costs).
(1) In the prior year, unrealized and realized gains and losses on derivatives not designated as hedges were included in other expenses.
Potash
-- Potash gross profit decreased in the current quarter due to lower total
sales tonnes than the same period last year, partially offset by higher
realized sales prices.
-- Sales volumes were 10 percent lower this quarter due to low opening
inventories as the Vanscoy facility gradually ramps up to full
production after the completion of the expansion project at the end of
2014. Vanscoy's production this quarter was 460,000 tonnes, in line with
the targeted level.
-- Realized sales prices were higher than the same period last year.
Overall potash prices rose in both domestic and international markets,
but with a stronger increase in international markets.
-- Cost of product sold was higher than the same period last year due to
lower production volumes and higher maintenance costs associated with
the planned turnaround at Vanscoy in June this quarter. As a result,
cash cost of product manufactured was $110 per tonne this quarter
compared to last year at $92 per tonne.
Phosphate
-- Phosphate gross profit increased due to a combination of higher volumes,
lower costs and an improvement in sales price relative to the previous
year.
-- Sales volumes increased by 8 percent due to higher product availability
and sales prices were $67 per tonne higher than the same quarter last
year as a result of tight regional supply and demand fundamentals.
Overall phosphate margins were $102 per tonne this quarter, an $80 per
tonne increase over the same period last year.
Wholesale Other
Wholesale Other: gross profit breakdown
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Three months ended June 30,
(millions of U.S. dollars) 2015 2014 Change
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Product purchased for resale 1 12 (11)
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Ammonium sulfate 21 21 -
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Environmentally Smart Nitrogen ("ESN®") 14 5 9
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Other 6 10 (4)
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42 48 (6)
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-- Gross profit for Wholesale's Other product category decreased this
quarter primarily due to lower sales volumes and margins in the product
purchased for resale business as these operations were significantly
scaled back as part of our portfolio review.
-- ESN® gross profit increased this quarter due to higher sales volumes
and lower cost of product sold.
Other
EBITDA for our Other non-operating business unit for the second quarter of 2015 had net earnings of $3-million, compared to a net expense of $6-million for the second quarter of 2014. The variance was due to the following:
-- A $12-million higher gross profit recovery for the second quarter of
2015 compared to the second quarter of 2014. This is a result of lower
inter-segment inventory held at the end of the second quarter;
-- A $12-million decrease in environmental remediation liability expense as
higher provisions were recorded for our plant and mine sites in 2014;
and,
-- A $22-million increase in share-based payments expense related to a
strengthening in the fair value of our share-based payment plans against
our peer group.
FINANCIAL CONDITION
The following are changes to working capital on our Consolidated Balance Sheets for the six-month period ended June 30, 2015 compared to December 31, 2014.
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(millions of U.S. December
dollars, except June 30, 31, $ % Explanation of the
where noted) 2015 2014 Change Change change in balance
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Current assets
Cash and cash 647 848 (201) (24%) See discussion under
equivalents the section
"Liquidity and
Capital Resources".
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Accounts receivable 3,556 2,075 1,481 71% Sales during the
spring season
resulted in higher
Retail trade and
vendor rebates
receivable.
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Income taxes 3 138 (135) (98%) First half tax
receivable provision exceeded
tax installment
payments made net of
current period tax
refunds.
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Inventories 2,868 3,505 (637) (18%) Inventory drawdown
due to increased
seasonal sales
activity.
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Prepaid expenses 119 710 (591) (83%) Drawdown of prepaid
and deposits inventory due to
increased seasonal
sales activity in
the spring.
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Other current 138 122 16 13% -
assets
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Current liabilities
Short-term debt 681 1,527 (846) (55%) Proceeds from the
issuance of
debentures were used
to repay commercial
paper and credit
facilities,
partially offset by
new drawings for
cash needs.
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Accounts payable 4,038 4,197 (159) (4%) Reductions in
customer prepayments
during the spring
application season
and reductions in
accruals related to
Wholesale capital
expansion projects
more than offset
increased Retail
balances related to
seasonal inventory
purchases.
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Income taxes 110 5 105 2,100% First half provision
payable exceeded the first
half installments
largely in the U.S.
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Current portion of 1 11 (10) (91%) -
long-term debt
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Current portion of 88 113 (25) (22%) -
other provisions
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Working capital 2,413 1,545 868 56%
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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) 2015 2014 Change
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Cash provided by operating activities 796 798 (2)
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Cash used in investing activities (914) (1,036) 122
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Cash (used in) provided by financing
activities (89) 214 (303)
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Effect of exchange rate changes on cash and
cash equivalents 6 (19) 25
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Decrease in cash and cash equivalents from
continuing operations (201) (43) (158)
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Cash and cash equivalents provided by
discontinued operations - 1 (1)
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Cash provided by operating activities - Drivers behind the $2-million
decrease
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Source of cash - $79-million change related to tax refunds of $11-
million in the first half of 2015 compared to taxes paid
of $68-million in the first half of 2014.
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Use of cash - Collections were lower in the first half of 2015 due
to a slight decrease in sales, with trade receivable
turnover remaining consistent but other non-trade
receivables increasing as a result of insurance and
rebates receivable. Reduced cash inflows compared to
2014 as reduced sales were more than offset by lower
cash cost of product sold during the first half of 2015
due to lower costs of natural gas and operating
efficiencies in our nitrogen plants. This resulted in
lower outstanding payables and inventory which was
reduced because of our exit from the product purchased
for resale business. A decrease in accounts payable also
resulted from the timing of payments.
----------------------------------------------------------------------------
Cash used in investing activities - Drivers behind the $122-million decrease
----------------------------------------------------------------------------
Use of cash - Lower capital expenditures of $262-million in the
first half of 2015 due to the completion of the tie-in
of our Vanscoy potash mine expansion at the end of 2014.
- Acquired more retail businesses during the first half
of 2015.
----------------------------------------------------------------------------
Cash (used in) provided by financing activities - Drivers behind the $303-
million increase
----------------------------------------------------------------------------
Source of cash - Received $1-billion proceeds from issuance of long-
term debt in the first six months of 2015.
----------------------------------------------------------------------------
Use of cash - Paid down short-term debt from proceeds of issuance of
long-term debt in the first half of 2015 compared to
draws on commercial paper facilities in the first half
of 2014.
- Repurchased common shares for $100-million in the
first half of 2015; no similar activity in the same
period in 2014.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital Expenditures
----------------------------------------------------------------------------
Six months ended June 30,
(millions of U.S. dollars) 2015 2014
----------------------------------------------------------------------------
Sustaining capital 221 300
----------------------------------------------------------------------------
Investing capital 519 702
----------------------------------------------------------------------------
Total 740 1,002
----------------------------------------------------------------------------
-- Our investing capital expenditures decreased in the first half of 2015
compared to the first half of 2014 due to the completion of the tie-in
of our Vanscoy potash facility expansion in the fourth quarter of 2014,
partially offset by increased expenditures relating to the Borger
nitrogen expansion project. We incurred investing capital expenditures
amounting to $192-million for the expansion of the Borger nitrogen
facility.
-- The timeline and scope of the Borger nitrogen expansion project have
been revised. The refresh of the existing ammonia facility and the new
610,000 tonne urea facility will be completed as planned; however, the
completion date has been extended to the end of 2016 in order to manage
costs, and the 145,000 tonne ammonia expansion portion of the project
has been cancelled to minimize project risk. The total capital
expenditure for the revised scope is expected to be within 5 percent of
the $720-million estimate.
-- We expect Agrium's remaining capital spending to approximate $500-
million to $600-million in 2015. We anticipate that we will be able to
finance the announced projects through a combination of cash provided
from operating activities and existing credit facilities.
Short-term Debt
-- Our short-term debt of $681-million at June 30, 2015 is outlined in note
5 of our Summarized Notes to the Consolidated Financial Statements.
-- Our short-term debt increased by $416-million during the three months
ended June 30, 2015, which in turn contributed to a decrease in our
unutilized short-term financing capacity to $2.2-billion as at June 30,
2015.
Capital Management
-- Our revolving credit facilities require that we maintain specific
interest coverage and debt-to-capital ratios, as well as other non-
financial covenants as defined in our credit agreements. We were in
compliance with all covenants at June 30, 2015.
NORMAL COURSE ISSUER BID
In January 2015, the Toronto Stock Exchange ("TSX") accepted Agrium's notice of intention to make a normal course issuer bid ("NCIB") whereby Agrium may purchase up to 7,185,866 common shares on the TSX and New York Stock Exchange during the period from January 26, 2015 to January 25, 2016. During the six months ended June 30, 2015, we purchased 952,053 shares at an average share price of $104.99 for total consideration of $100-million. There were no share repurchases subsequent to June 30, 2015. Shareholders can obtain a copy of the NCIB notice submitted to the TSX from Agrium without charge upon request.
OUTSTANDING SHARE DATA
Agrium had 142,791,278 outstanding shares at July 31, 2015. At that date, under our stock option plans, shares expected to be issued for options outstanding were negligible.
SELECTED QUARTERLY INFORMATION ---------------------------------------------------------------------------- (millions of U.S. dollars, except per 2015 2015 2014 2014 2014 2014 2013 2013 share amounts) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 ---------------------------------------------------------------------------- Sales 6,992 2,872 2,705 2,920 7,338 3,079 2,867 2,796 ---------------------------------------------------------------------------- Gross profit 1,708 584 732 665 1,599 556 740 629 ---------------------------------------------------------------------------- Net earnings from continuing operations 675 14 70 91 625 12 110 80 ---------------------------------------------------------------------------- Net (loss) earnings from discontinued operations - - (19) (41) (9) (9) (11) (4) ---------------------------------------------------------------------------- Net earnings 675 14 51 50 616 3 99 76 ---------------------------------------------------------------------------- Earnings per share from continuing operations attributable to equity holders of Agrium: ---------------------------------------------------------------------------- Basic and diluted 4.71 0.08 0.46 0.63 4.34 0.08 0.74 0.54 ---------------------------------------------------------------------------- Loss per share from discontinued operations attributable to equity holders of Agrium: ---------------------------------------------------------------------------- Basic and diluted - - (0.13) (0.28) (0.06) (0.06) (0.08) (0.02) ---------------------------------------------------------------------------- Earnings per share attributable to equity holders of Agrium: ---------------------------------------------------------------------------- Basic and diluted 4.71 0.08 0.33 0.35 4.28 0.02 0.66 0.52 ----------------------------------------------------------------------------
The agricultural products business is seasonal in nature. Consequently, comparisons made on a year-over-year basis are more appropriate than quarter-over-quarter comparisons. Crop input sales are primarily concentrated in the spring and fall crop input application seasons. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections from accounts receivables generally occur after the application season is complete and our customer prepayments are mostly concentrated in December and January.
ADDITIONAL IFRS AND NON-IFRS FINANCIAL MEASURES
Certain financial measures in this MD&A are not prescribed by IFRS. We consider these financial measures discussed herein to provide useful information to both management and investors in measuring our financial performance and financial condition.
In general, an additional IFRS financial measure is a measure relevant to understanding a company's financial performance that is not a minimum financial statement measure mandated by IFRS. A non-IFRS financial measure generally either excludes or includes amounts not excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS. Non-IFRS financial measures are not recognized measures under IFRS and our method of calculation is unlikely to be directly comparable to that of other companies. These non-IFRS measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.
The following table outlines our additional IFRS financial measure, its definition and why management uses such measure.
----------------------------------------------------------------------------
Why We Use the Measure
Additional IFRS Definition and Why it is Useful to
financial measure Investors
----------------------------------------------------------------------------
EBIT Earnings (loss) from Provides management and
continuing operations investors with
before finance costs and information for
income taxes. comparison of our
operating results to the
operating results of
other companies. This
measure eliminates the
impact of finance and tax
structure variables that
exist between entities.
----------------------------------------------------------------------------
The following table outlines our non-IFRS financial measures, their definitions and why management uses each measure.
----------------------------------------------------------------------------
Why We Use the Measure
Non-IFRS financial Definition and Why it is Useful to
measures Investors
----------------------------------------------------------------------------
EBITDA Earnings (loss) from Refer to EBIT. EBITDA is
continuing operations also frequently used by
before finance costs, investors and analysts
income taxes, for valuation purposes
depreciation and when multiplied by a
amortization. factor to estimate the
enterprise value of a
company. EBITDA is also a
component in the
determination of annual
incentive compensation
for certain management
employees, and in
calculation of certain of
our debt covenants.
----------------------------------------------------------------------------
Adjusted EBITDA EBITDA before finance Useful in evaluating our
costs, income taxes, business performance by
depreciation and including our
amortization of joint proportionate share of
ventures. joint ventures in
operating results.
----------------------------------------------------------------------------
Cash cost of product All fixed and variable Enables investors to
manufactured ("Cash costs are accumulated in better understand the
COPM") cost of product performance of our
manufactured ("COPM"). manufacturing operations
Cash COPM excludes in comparison to other
depreciation and crop nutrient producers.
amortization expense.
Fixed costs per tonne When COPM costs are
will fluctuate as divided by the production
production tonnage tonnes for the period,
fluctuates. Fixed costs the result is actual COPM
will remain constant per tonne, which is
whether or not tonnes are compared to the standard
produced. Variable costs COPM per tonne - a
per tonne remain constant calculation of fixed and
as production tonnage variable costs for a
fluctuates. Variable standard or typical
costs fluctuate as period of production. The
production tonnage standard COPM per tonne
fluctuates. Direct is multiplied by the
freight is a production tonnes for the
transportation cost to period, and the resulting
move the product from an dollar amount is
Agrium location to the transferred to inventory.
point of sale. It is not Any remaining costs are
a component of COPM. recorded directly to cost
of product sold as
production volume or cost
efficiency variances.
There is no directly
comparable IFRS measure
for cash cost of product
manufactured.
----------------------------------------------------------------------------
RECONCILIATIONS OF ADDITIONAL IFRS AND NON-IFRS FINANCIAL MEASURES
Adjusted EBITDA and EBITDA to EBIT
----------------------------------------------------------------------------
Three months ended
June 30, 2015
-------------------------------------------
(millions of U.S. dollars) Retail Wholesale Other Consolidated
----------------------------------------------------------------------------
Adjusted EBITDA 713 438 3 1,154
----------------------------------------------------------------------------
Equity accounted joint ventures:
Finance costs and income taxes - 4 - 4
----------------------------------------------------------------------------
Depreciation and amortization - 5 - 5
----------------------------------------------------------------------------
EBITDA 713 429 3 1,145
----------------------------------------------------------------------------
Depreciation and amortization 66 49 4 119
----------------------------------------------------------------------------
EBIT 647 380 (1) 1,026
----------------------------------------------------------------------------
Adjusted EBITDA and EBITDA to EBIT
----------------------------------------------------------------------------
Three months ended
June 30, 2014
-------------------------------------------
(millions of U.S. dollars) Retail Wholesale Other Consolidated
----------------------------------------------------------------------------
Adjusted EBITDA 791 263 (6) 1,048
----------------------------------------------------------------------------
Equity accounted joint ventures:
Finance costs and income taxes - 8 - 8
----------------------------------------------------------------------------
Depreciation and amortization - 3 - 3
----------------------------------------------------------------------------
EBITDA 791 252 (6) 1,037
----------------------------------------------------------------------------
Depreciation and amortization 77 61 4 142
----------------------------------------------------------------------------
EBIT 714 191 (10) 895
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended
June 30, 2015
-------------------------------------------
(millions of U.S. dollars) Retail Wholesale Other Consolidated
----------------------------------------------------------------------------
Adjusted EBITDA 705 724 (85) 1,344
----------------------------------------------------------------------------
Equity accounted
joint ventures:
Finance costs and income taxes - 5 - 5
----------------------------------------------------------------------------
Depreciation and amortization - 8 - 8
----------------------------------------------------------------------------
EBITDA 705 711 (85) 1,331
----------------------------------------------------------------------------
Depreciation and amortization 123 99 8 230
----------------------------------------------------------------------------
EBIT 582 612 (93) 1,101
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended
June 30, 2014
-------------------------------------------
(millions of U.S. dollars) Retail Wholesale Other Consolidated
----------------------------------------------------------------------------
Adjusted EBITDA 808 500 (74) 1,234
----------------------------------------------------------------------------
Equity accounted
joint ventures:
Finance costs and income taxes - 12 - 12
----------------------------------------------------------------------------
Depreciation and amortization - 5 - 5
----------------------------------------------------------------------------
EBITDA 808 483 (74) 1,217
----------------------------------------------------------------------------
Depreciation and amortization 149 114 6 269
----------------------------------------------------------------------------
EBIT 659 369 (80) 948
----------------------------------------------------------------------------
CRITICAL ACCOUNTING ESTIMATES
We prepare our financial statements in accordance with IFRS, which requires us to make judgments, assumptions and estimates in applying accounting policies. For further information on the Company's critical accounting estimates, refer to the section "Critical Accounting Estimates" in our 2014 annual MD&A, which is contained in our 2014 Annual Report. Since the date of our 2014 annual MD&A, there have not been any material changes to our critical accounting estimates.
BUSINESS RISKS
The information presented in the "Enterprise Risk Management" section on pages 64 - 68 in our 2014 Annual Report and under the heading "Risk Factors" on pages 22 - 31 in our 2014 Annual Information Form has not changed materially since December 31, 2014.
CONTROLS AND PROCEDURES
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2015 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 2014 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.
MARKET OUTLOOK
Prospects for global crop prices have improved since June due to less than ideal weather conditions across a number of geographies. Excessive moisture in the U.S. Corn Belt has led to the deterioration in crops and led to lower than anticipated planted acreage in some areas. Severe drought across much of Western Canada has also reduced yield expectations. While new crop futures prices have recently declined, the rally in crop prices in late June and early July is evidence of how sensitive global crop supply and demand is to relatively small changes in yield expectations.
In areas with excessive moisture, it has been difficult to get equipment into the fields to apply crop nutrients and crop protection products, which in some cases has led to missed applications. In drought areas growers have in some cases sought to reduce crop nutrient and crop protection applications on struggling crops. The prospects outside of drought impacted areas are more positive for the remainder of 2015 as stronger prices in early July offered growers higher priced selling opportunities and improved grower sentiment. Furthermore, in areas with excess moisture, the wet conditions tend to lead to increased disease pressure, supporting fungicide demand.
Following the end of the northern hemisphere's spring application season, crop nutrient prices have generally weakened, driven by the seasonal slow-down in demand. Tightened Chinese urea export supplies and seasonal demand fuelled an increase in urea prices in-season. However, the expectation of a return of increased Chinese supply to the export market, combined with new exportable supply in Algeria, Saudi Arabia and the U.S. in the second half of the year have pressured global prices. We expect Chinese anthracite-based urea costs to continue to provide a floor to the urea market in the second half of 2015, and that Indian import demand will be strong, particularly in light of the strong start to the monsoon season.
Potash shipments to China and India have been robust in recent months and are expected to provide a solid base to global demand in the second half of 2015. In contrast, Brazilian demand has been relatively slow, down 21 percent year-over-year in the first half of 2015. However, we expect the pace of demand to improve in the third quarter, in advance of the domestic planting season. Following the spring season, North American potash prices declined, significantly narrowing the premium relative to other major global markets. The phosphate market has been relatively stable, with robust Indian demand offset by relatively weak Brazilian import demand and record Chinese DAP/MAP exports.
Forward-Looking Statements
Certain statements and other information included in this document constitute "forward-looking information" and/or "financial outlook" 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 document 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: 2015 annual guidance, including diluted earnings per share and Retail EBITDA; estimated 2015 nitrogen and potash production volumes; capital spending expectations in 2015; and our market outlook for the remainder of 2015, including anticipated supply and demand for our products and services, expected market and industry conditions with respect to planted acres, prices and the impact of currency fluctuations and import and export volumes. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements. The purpose of the outlook provided herein is to assist readers in understanding our expected and targeted financial and operating results, and this information may not be appropriate for other purposes.
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. 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 additional key assumptions that have been made include, among other things assumptions with respect to Agrium's ability to successfully integrate and realize the anticipated benefits of its already completed and future acquisitions and that we will be able to implement our standards, controls, procedures and policies at any acquired businesses to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by Agrium, with respect to prices, margins, product availability and supplier agreements; the completion of our expansion projects on schedule, as planned and on budget; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for the remainder of 2015; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to identify suitable candidates for acquisitions and negotiate acceptable terms; our ability to maintain our investment grade rating and achieve our performance targets; and our receipt, on time, of all necessary permits, utilities and project approvals with respect to our expansion projects and that we will have the resources necessary to meet the project's approach. Also refer to the discussion under the heading "Key Assumptions and Risks in Respect of Forward-Looking Statements" in our 2014 annual MD&A, with respect to further material assumptions associated with our forward-looking statements.
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 yield and prices; the supply and demand and price levels for our major products may vary from what we currently anticipate; 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, regional natural gas supply restrictions, as well as counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; the risk that work on the Egyptian Misr Fertilizers Production Company S.A.E. nitrogen facility expansion in Egypt may be interrupted again and may not be completed on the timelines currently anticipated or at all; the risk of additional capital expenditure cost escalation or delays in respect of our Borger nitrogen expansion project and the ramp-up of production following the recent tie-in of our Vanscoy potash expansion project; 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 U.S. including those disclosed under the heading "Risk Factors" in our Annual Information Form for the year ended December 31, 2014 and under the headings "Enterprise Risk Management" and "Key Assumptions and Risks in respect of Forward-Looking Statements" in our 2014 annual MD&A.
The purpose of our expected diluted earnings per share guidance range is to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes.
Agrium disclaims any intention or obligation to update or revise any forward-looking statements in this document 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 producer and distributor of agricultural products and services in North America, South America, Australia and Egypt through its agricultural retail-distribution and wholesale nutrient businesses. Agrium supplies growers with key products and services such as crop nutrients, crop protection, seed, and agronomic and application services, thereby helping to meet the ever growing global demand for food and fiber. Agrium produces nitrogen, potash and phosphate fertilizers, with a combined wholesale nutrient capacity of over nine million tonnes and with competitive advantages across all product lines. Agrium retail-distribution has an unmatched network of over 1,300 facilities and over 3,000 crop consultants. We partner with over half a million grower customers globally to help them increase their yields and returns on more than 50 different crops. With a focus on sustainability, the company strives to improve the communities in which it operates through safety, education, environmental improvement and new technologies such as the development of precision agriculture and controlled release nutrient products. Agrium is focused on driving operational excellence across our businesses, pursuing value-enhancing growth opportunities and returning capital to shareholders. For more information visit: www.agrium.com.
A WEBSITE SIMULCAST of the 2015 2nd Quarter Conference Call will be available in a listen-only mode beginning Thursday, August 6, 2015 at 7:30 a.m. MST (9:30 a.m. EST). 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,
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales 6,992 7,338 9,864 10,417
----------------------------------------------------------------------------
Cost of product sold 5,284 5,739 7,572 8,262
----------------------------------------------------------------------------
Gross profit 1,708 1,599 2,292 2,155
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 585 609 1,015 1,053
----------------------------------------------------------------------------
General and administrative 66 82 133 151
----------------------------------------------------------------------------
Share-based payments 6 (16) 51 15
----------------------------------------------------------------------------
Earnings from associates and joint
ventures (1) (13) (1) (14)
----------------------------------------------------------------------------
Other expenses (income) (note 3) 26 42 (7) 2
----------------------------------------------------------------------------
Earnings before finance costs and
income taxes 1,026 895 1,101 948
----------------------------------------------------------------------------
Finance costs related to long-term
debt 50 9 87 28
----------------------------------------------------------------------------
Other finance costs 18 18 37 35
----------------------------------------------------------------------------
Earnings before income taxes 958 868 977 885
----------------------------------------------------------------------------
Income taxes 283 243 288 248
----------------------------------------------------------------------------
Net earnings from continuing
operations 675 625 689 637
----------------------------------------------------------------------------
Net loss from discontinued
operations - (9) - (18)
----------------------------------------------------------------------------
Net earnings 675 616 689 619
----------------------------------------------------------------------------
Attributable to:
----------------------------------------------------------------------------
Equity holders of Agrium 674 615 686 617
----------------------------------------------------------------------------
Non-controlling interest 1 1 3 2
----------------------------------------------------------------------------
Net earnings 675 616 689 619
----------------------------------------------------------------------------
Earnings per share attributable to
equity holders of
Agrium (note 4)
----------------------------------------------------------------------------
Basic and diluted earnings per 4.71 4.34 4.78 4.42
share from continuing operations
----------------------------------------------------------------------------
Basic and diluted loss per share - (0.06) - (0.13)
from discontinued operations
----------------------------------------------------------------------------
Basic and diluted earnings per
share 4.71 4.28 4.78 4.29
----------------------------------------------------------------------------
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,
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings 675 616 689 619
----------------------------------------------------------------------------
Other comprehensive income (loss)
----------------------------------------------------------------------------
Items that are or may be
reclassified to earnings
----------------------------------------------------------------------------
Cash flow hedges
----------------------------------------------------------------------------
Effective portion of changes
in fair value (4) (4) (20) (4)
----------------------------------------------------------------------------
Deferred income taxes on
changes in fair value 1 1 5 1
----------------------------------------------------------------------------
Share of comprehensive income
(loss) of associates and - 1 (5 2
joint ventures )
----------------------------------------------------------------------------
Foreign currency translation
----------------------------------------------------------------------------
Gains (losses) 57 102 (238) (4)
----------------------------------------------------------------------------
Reclassifications to
earnings 1 - 1 -
----------------------------------------------------------------------------
55 100 (257) (5)
----------------------------------------------------------------------------
Items that will never be
reclassified to earnings
----------------------------------------------------------------------------
Post-employment benefits
----------------------------------------------------------------------------
Actuarial losses - (20) - (20)
----------------------------------------------------------------------------
Deferred income taxes 1 6 1 6
----------------------------------------------------------------------------
1 (14) 1 (14)
----------------------------------------------------------------------------
Other comprehensive income (loss) 56 86 (256) (19)
----------------------------------------------------------------------------
Comprehensive income 731 702 433 600
----------------------------------------------------------------------------
Attributable to:
----------------------------------------------------------------------------
Equity holders of Agrium 730 701 431 598
----------------------------------------------------------------------------
Non-controlling interest 1 1 2 2
----------------------------------------------------------------------------
Comprehensive income 731 702 433 600
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Consolidated Balance Sheets
(Millions of U.S. dollars)
(Unaudited)
June 30, December 31,
----------------------------------------------------------------------------
2015 2014 2014
----------------------------------------------------------------------------
Assets
----------------------------------------------------------------------------
Current assets
----------------------------------------------------------------------------
Cash and cash equivalents 647 759 848
----------------------------------------------------------------------------
Accounts receivable 3,556 3,542 2,075
----------------------------------------------------------------------------
Income taxes receivable 3 4 138
----------------------------------------------------------------------------
Inventories 2,868 3,097 3,505
----------------------------------------------------------------------------
Prepaid expenses and deposits 119 157 710
----------------------------------------------------------------------------
Other current assets 138 124 122
----------------------------------------------------------------------------
Assets held for sale - 210 -
----------------------------------------------------------------------------
7,331 7,893 7,398
----------------------------------------------------------------------------
Property, plant and equipment (note 7) 6,506 5,788 6,272
----------------------------------------------------------------------------
Intangibles 669 712 695
----------------------------------------------------------------------------
Goodwill 2,004 1,970 2,014
----------------------------------------------------------------------------
Investments in associates and joint
ventures 603 627 576
----------------------------------------------------------------------------
Other assets 68 95 78
----------------------------------------------------------------------------
Deferred income tax assets 65 75 75
----------------------------------------------------------------------------
17,246 17,160 17,108
----------------------------------------------------------------------------
Liabilities and shareholders' equity
----------------------------------------------------------------------------
Current liabilities
----------------------------------------------------------------------------
Short-term debt (note 5) 681 1,202 1,527
----------------------------------------------------------------------------
Accounts payable 4,038 4,263 4,197
----------------------------------------------------------------------------
Income taxes payable 110 179 5
----------------------------------------------------------------------------
Current portion of long-term debt 1 54 11
----------------------------------------------------------------------------
Current portion of other provisions 88 116 113
----------------------------------------------------------------------------
Liabilities held for sale - 55 -
----------------------------------------------------------------------------
4,918 5,869 5,853
----------------------------------------------------------------------------
Long-term debt (note 5) 4,533 3,060 3,559
----------------------------------------------------------------------------
Post-employment benefits 146 157 151
----------------------------------------------------------------------------
Other provisions 329 416 367
----------------------------------------------------------------------------
Other liabilities 81 37 69
----------------------------------------------------------------------------
Deferred income tax liabilities 446 441 422
----------------------------------------------------------------------------
10,453 9,980 10,421
----------------------------------------------------------------------------
Shareholders' equity
----------------------------------------------------------------------------
Share capital 1,812 1,821 1,821
----------------------------------------------------------------------------
Retained earnings 5,864 5,632 5,502
----------------------------------------------------------------------------
Accumulated other comprehensive loss (891) (276) (643)
----------------------------------------------------------------------------
Equity holders of Agrium 6,785 7,177 6,680
----------------------------------------------------------------------------
Non-controlling interest 8 3 7
----------------------------------------------------------------------------
Total equity 6,793 7,180 6,687
----------------------------------------------------------------------------
17,246 17,160 17,108
----------------------------------------------------------------------------
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,
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating
----------------------------------------------------------------------------
Net earnings from continuing
operations 675 625 689 637
----------------------------------------------------------------------------
Adjustments for
----------------------------------------------------------------------------
Depreciation and amortization 119 142 230 269
----------------------------------------------------------------------------
Earnings from associates and
joint ventures (1) (13) (1) (14)
----------------------------------------------------------------------------
Share-based payments 6 (16) 51 15
----------------------------------------------------------------------------
Unrealized (gain) loss on
derivative financial (13) 9 13 (5)
instruments
----------------------------------------------------------------------------
Unrealized foreign exchange gain (51) (17) (10) (19)
----------------------------------------------------------------------------
Interest income (16) (19) (33) (30)
----------------------------------------------------------------------------
Finance costs 68 27 124 63
----------------------------------------------------------------------------
Income taxes 283 243 288 248
----------------------------------------------------------------------------
Other 6 15 (19) 27
----------------------------------------------------------------------------
Interest received 16 19 33 31
----------------------------------------------------------------------------
Interest paid (48) (21) (90) (53)
----------------------------------------------------------------------------
Income taxes (paid) received (7) (32) 11 (68)
----------------------------------------------------------------------------
Dividends from associates and
joint ventures 1 6 2 7
----------------------------------------------------------------------------
Net changes in non-cash working
capital (947) (931) (492) (310)
----------------------------------------------------------------------------
Cash provided by operating
activities 91 37 796 798
----------------------------------------------------------------------------
Investing
----------------------------------------------------------------------------
Acquisitions, net of cash acquired (24) (2) (84) (18)
----------------------------------------------------------------------------
Capital expenditures (341) (543) (740) (1,002)
----------------------------------------------------------------------------
Capitalized borrowing costs (8) (30) (23) (53)
----------------------------------------------------------------------------
Purchase of investments (43) (39) (85) (65)
----------------------------------------------------------------------------
Proceeds from sale of investments 27 32 45 44
----------------------------------------------------------------------------
Proceeds from sale of property,
plant and equipment 4 - 54 -
----------------------------------------------------------------------------
Other 6 19 11 (3)
----------------------------------------------------------------------------
Net changes in non-cash working
capital (74) 10 (92) 61
----------------------------------------------------------------------------
Cash used in investing activities (453) (553) (914) (1,036)
----------------------------------------------------------------------------
Financing
----------------------------------------------------------------------------
Short-term debt 422 793 (738) 444
----------------------------------------------------------------------------
Long-term debt issued - - 1,000 -
----------------------------------------------------------------------------
Transaction costs on long-term
debt - - (14) -
----------------------------------------------------------------------------
Repayment of long-term debt (2) (5) (15) (15)
----------------------------------------------------------------------------
Dividends paid (114) (108) (223) (216)
----------------------------------------------------------------------------
Shares issued - 1 1 1
----------------------------------------------------------------------------
Shares repurchased (100) - (100) -
----------------------------------------------------------------------------
Cash provided by (used in) financing
activities 206 681 (89) 214
----------------------------------------------------------------------------
Effect of exchange rate changes on
cash and cash equivalents 23 (16) 6 (19)
----------------------------------------------------------------------------
(Decrease) increase in cash and cash
equivalents from continuing
operations (133) 149 (201) (43)
----------------------------------------------------------------------------
Cash and cash equivalents provided
by discontinued operations - 18 - 1
----------------------------------------------------------------------------
Cash and cash equivalents -
beginning of period 780 592 848 801
----------------------------------------------------------------------------
Cash and cash equivalents - end of
period 647 759 647 759
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Shareholders' Equity
(Millions of U.S. dollars, except share data)
(Unaudited)
Millions of
common shares Share capital Retained earnings
----------------------------------------------------------------------------
December 31, 2013 144 1,820 5,253
----------------------------------------------------------------------------
Net earnings - - 617
----------------------------------------------------------------------------
Other comprehensive
income (loss), net
of tax
----------------------------------------------------------------------------
Post-employment
benefits - - (14)
----------------------------------------------------------------------------
Other - - -
----------------------------------------------------------------------------
Comprehensive
income (loss), net - - 603
of tax
----------------------------------------------------------------------------
Dividends - - (216)
----------------------------------------------------------------------------
Non-controlling
interest - - -
transactions
----------------------------------------------------------------------------
Share-based payment
transactions - 1 -
----------------------------------------------------------------------------
Impact of adopting
IFRS 9 at January - - (8)
1, 2014
----------------------------------------------------------------------------
June 30, 2014 144 1,821 5,632
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2014 144 1,821 5,502
----------------------------------------------------------------------------
Net earnings - - 686
----------------------------------------------------------------------------
Other comprehensive
income (loss), net
of tax
----------------------------------------------------------------------------
Post-employment
benefits - - 1
----------------------------------------------------------------------------
Other - - -
----------------------------------------------------------------------------
Comprehensive
income (loss), net - - 687
of tax
----------------------------------------------------------------------------
Dividends - - (237)
----------------------------------------------------------------------------
Non-controlling
interest - - -
transactions
----------------------------------------------------------------------------
Shares repurchased (1) (12) (88)
----------------------------------------------------------------------------
Share-based payment
transactions - 3 -
----------------------------------------------------------------------------
Reclassification of
cash flow hedges - - -
----------------------------------------------------------------------------
June 30, 2015 143 1,812 5,864
----------------------------------------------------------------------------
Other comprehensive income
------------------------------------------------------
Comprehensive
loss of Available
Cash associates for sale Foreign
flow and joint financial currency
hedges ventures instruments translation Total
----------------------------------------------------------------------------
December 31, 2013 - (7) (8) (264) (279)
----------------------------------------------------------------------------
Net earnings - - - - -
----------------------------------------------------------------------------
Other comprehensive
income (loss), net
of tax
----------------------------------------------------------------------------
Post-employment
benefits - - - - -
----------------------------------------------------------------------------
Other (3) 2 - (4) (5)
----------------------------------------------------------------------------
Comprehensive
income (loss), net (3) 2 - (4) (5)
of tax
----------------------------------------------------------------------------
Dividends - - - - -
----------------------------------------------------------------------------
Non-controlling
interest - - - - -
transactions
----------------------------------------------------------------------------
Share-based payment
transactions - - - - -
----------------------------------------------------------------------------
Impact of adopting
IFRS 9 at January - - 8 - 8
1, 2014
----------------------------------------------------------------------------
June 30, 2014 (3) (5) - (268) (276)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2014 (27) (11) - (605) (643)
----------------------------------------------------------------------------
Net earnings - - - - -
----------------------------------------------------------------------------
Other comprehensive
income (loss), net
of tax
----------------------------------------------------------------------------
Post-employment
benefits - - - - -
----------------------------------------------------------------------------
Other (15) (5) - (236) (256)
----------------------------------------------------------------------------
Comprehensive
income (loss), net (15) (5) - (236) (256)
of tax
----------------------------------------------------------------------------
Dividends - - - - -
----------------------------------------------------------------------------
Non-controlling
interest - - - - -
transactions
----------------------------------------------------------------------------
Shares repurchased - - - - -
----------------------------------------------------------------------------
Share-based payment
transactions - - - - -
----------------------------------------------------------------------------
Reclassification of
cash flow hedges 8 - - - 8
----------------------------------------------------------------------------
June 30, 2015 (34) (16) - (841) (891)
----------------------------------------------------------------------------
Non-
Equity holders of controlling
Agrium interest Total equity
----------------------------------------------------------------------------
December 31, 2013 6,794 2 6,796
----------------------------------------------------------------------------
Net earnings 617 2 619
----------------------------------------------------------------------------
Other comprehensive
income (loss), net
of tax
----------------------------------------------------------------------------
Post-employment
benefits (14) - (14)
----------------------------------------------------------------------------
Other (5) - (5)
----------------------------------------------------------------------------
Comprehensive
income (loss), net 598 2 600
of tax
----------------------------------------------------------------------------
Dividends (216) - (216)
----------------------------------------------------------------------------
Non-controlling
interest - (1) (1)
transactions
----------------------------------------------------------------------------
Share-based payment
transactions 1 - 1
----------------------------------------------------------------------------
Impact of adopting
IFRS 9 at January - - -
1, 2014
----------------------------------------------------------------------------
June 30, 2014 7,177 3 7,180
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2014 6,680 7 6,687
----------------------------------------------------------------------------
Net earnings 686 3 689
----------------------------------------------------------------------------
Other comprehensive
income (loss), net
of tax
----------------------------------------------------------------------------
Post-employment
benefits 1 - 1
----------------------------------------------------------------------------
Other (256) (1) (257)
----------------------------------------------------------------------------
Comprehensive
income (loss), net 431 2 433
of tax
----------------------------------------------------------------------------
Dividends (237) - (237)
----------------------------------------------------------------------------
Non-controlling
interest - (1) (1)
transactions
----------------------------------------------------------------------------
Shares repurchased (100) - (100)
----------------------------------------------------------------------------
Share-based payment
transactions 3 - 3
----------------------------------------------------------------------------
Reclassification of
cash flow hedges 8 - 8
----------------------------------------------------------------------------
June 30, 2015 6,785 8 6,793
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Summarized Notes to the Consolidated Financial Statements
For the six months ended June 30, 2015
(Millions of U.S. dollars, unless otherwise stated)
(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). Our Corporate head office is located at 13131 Lake Fraser Drive S.E., Calgary, Canada. We conduct our operations globally from our Wholesale head office in Calgary and our Retail head office in Loveland, Colorado, United States. In these financial statements, "we", "us", "our" and "Agrium" mean Agrium Inc., its subsidiaries and joint arrangements.
Agrium operates two business units:
-- Retail: Distributes crop nutrients, crop protection products, seed,
merchandise and services directly to growers through a network of farm
centers in two geographical segments:
-- North America, including the United States and Canada; and
-- International, including Australia and South America.
-- Wholesale: Operates in North and South America and Europe producing,
marketing and distributing crop nutrients and industrial products
through the following businesses:
-- Nitrogen: Manufacturing in Alberta, Texas and Argentina;
-- Potash: Mining and processing in Saskatchewan;
-- Phosphate: Mining and production facilities in Alberta and Idaho;
and
-- Other: Marketing nutrient-based products from other suppliers in
North and South America and Europe, and producing blended crop
nutrients and ESN® (Environmentally Smart Nitrogen) polymer-coated
nitrogen crop nutrients.
Additional information on our operating segments is included in note 2.
Seasonality in our business results from increased demand for our products during planting seasons. Sales are generally higher in spring and fall.
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 5, 2015. We prepared these interim financial statements in accordance with International Accounting Standard 34 Interim Financial Reporting. These statements 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 2014 Annual Report, available at www.agrium.com.
The accounting policies applied in these interim financial statements are the same as those applied in our audited annual financial statements in our 2014 Annual Report, with the exception of the accounting changes described in note 8 to our interim financial statements for the six months ended June 30, 2015.
2. Operating Segments
Segment information by business unit Three months ended June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
Retail Wholesale Other (1) Total
----------------------------------------------------------------------------
Sales - external 6,144 848 - 6,992
----------------------------------------------------------------------------
- inter-segment 16 326 (342) -
----------------------------------------------------------------------------
Total sales 6,160 1,174 (342) 6,992
----------------------------------------------------------------------------
Cost of product sold 4,896 765 (377) 5,284
----------------------------------------------------------------------------
Gross profit 1,264 409 35 1,708
----------------------------------------------------------------------------
Gross profit (%) 21 35 24
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 580 9 (4) 585
----------------------------------------------------------------------------
General and administrative 32 6 28 66
----------------------------------------------------------------------------
Share-based payments - - 6 6
----------------------------------------------------------------------------
(Earnings) loss from
associates and joint ventures (3) - 2 (1)
----------------------------------------------------------------------------
Other expenses 8 14 4 26
----------------------------------------------------------------------------
Earnings (loss) before finance costs
and income taxes 647 380 (1) 1,026
----------------------------------------------------------------------------
Finance costs - - 68 68
----------------------------------------------------------------------------
Earnings (loss) before income taxes 647 380 (69) 958
----------------------------------------------------------------------------
Depreciation and amortization 66 49 4 119
----------------------------------------------------------------------------
Finance costs - - 68 68
----------------------------------------------------------------------------
EBITDA (2) 713 429 3 1,145
----------------------------------------------------------------------------
Share of joint ventures
----------------------------------------------------------------------------
Finance costs and income taxes - 4 - 4
----------------------------------------------------------------------------
Depreciation and amortization - 5 - 5
----------------------------------------------------------------------------
Adjusted EBITDA 713 438 3 1,154
----------------------------------------------------------------------------
Segment information by business unit Three months ended June 30,
----------------------------------------------------------------------------
2014
----------------------------------------------------------------------------
Retail Wholesale Other (1) Total
----------------------------------------------------------------------------
Sales - external 6,392 946 - 7,338
----------------------------------------------------------------------------
- inter-segment 5 266 (271) -
----------------------------------------------------------------------------
Total sales 6,397 1,212 (271) 7,338
----------------------------------------------------------------------------
Cost of product sold 5,048 985 (294) 5,739
----------------------------------------------------------------------------
Gross profit 1,349 227 23 1,599
----------------------------------------------------------------------------
Gross profit (%) 21 19 22
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 603 10 (4) 609
----------------------------------------------------------------------------
General and administrative 35 13 34 82
----------------------------------------------------------------------------
Share-based payments - - (16) (16)
----------------------------------------------------------------------------
(Earnings) loss from
associates and joint ventures (4) (10) 1 (13)
----------------------------------------------------------------------------
Other expenses 1 23 18 42
----------------------------------------------------------------------------
Earnings (loss) before finance costs
and income taxes 714 191 (10) 895
----------------------------------------------------------------------------
Finance costs - - 27 27
----------------------------------------------------------------------------
Earnings (loss) before income taxes 714 191 (37) 868
----------------------------------------------------------------------------
Depreciation and amortization 77 61 4 142
----------------------------------------------------------------------------
Finance costs - - 27 27
----------------------------------------------------------------------------
EBITDA (2) 791 252 (6) 1,037
----------------------------------------------------------------------------
Share of joint ventures
----------------------------------------------------------------------------
Finance costs and income taxes - 8 - 8
----------------------------------------------------------------------------
Depreciation and amortization - 3 - 3
----------------------------------------------------------------------------
Adjusted EBITDA 791 263 (6) 1,048
----------------------------------------------------------------------------
(1) Includes inter-segment eliminations.
(2) Earnings (loss) from continuing operations before finance costs, income
taxes, depreciation and amortization.
Segment information by business unit Six months ended June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
Retail Wholesale Other (1) Total
----------------------------------------------------------------------------
Sales - external 8,404 1,460 - 9,864
----------------------------------------------------------------------------
- inter-segment 19 581 (600) -
----------------------------------------------------------------------------
Total sales 8,423 2,041 (600) 9,864
----------------------------------------------------------------------------
Cost of product sold 6,788 1,398 (614) 7,572
----------------------------------------------------------------------------
Gross profit 1,635 643 14 2,292
----------------------------------------------------------------------------
Gross profit (%) 19 32 23
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 1,003 20 (8) 1,015
----------------------------------------------------------------------------
General and administrative 58 16 59 133
----------------------------------------------------------------------------
Share-based payments - - 51 51
----------------------------------------------------------------------------
(Earnings) loss from
associates and joint ventures (4) 3 - (1)
----------------------------------------------------------------------------
Other (income) expenses (4) (8) 5 (7)
----------------------------------------------------------------------------
Earnings (loss) before finance costs
and income taxes 582 612 (93) 1,101
----------------------------------------------------------------------------
Finance costs - - 124 124
----------------------------------------------------------------------------
Earnings (loss) before income taxes 582 612 (217) 977
----------------------------------------------------------------------------
Depreciation and amortization 123 99 8 230
----------------------------------------------------------------------------
Finance costs - - 124 124
----------------------------------------------------------------------------
EBITDA (2) 705 711 (85) 1,331
----------------------------------------------------------------------------
Share of joint ventures
----------------------------------------------------------------------------
Finance costs and income taxes - 5 - 5
----------------------------------------------------------------------------
Depreciation and amortization - 8 - 8
----------------------------------------------------------------------------
Adjusted EBITDA 705 724 (85) 1,344
----------------------------------------------------------------------------
Segment information by business unit Six months ended June 30,
----------------------------------------------------------------------------
2014
----------------------------------------------------------------------------
Retail Wholesale Other (1) Total
----------------------------------------------------------------------------
Sales - external 8,619 1,798 - 10,417
----------------------------------------------------------------------------
- inter-segment 10 475 (485) -
----------------------------------------------------------------------------
Total sales 8,629 2,273 (485) 10,417
----------------------------------------------------------------------------
Cost of product sold 6,893 1,875 (506) 8,262
----------------------------------------------------------------------------
Gross profit 1,736 398 21 2,155
----------------------------------------------------------------------------
Gross profit (%) 20 18 21
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 1,039 21 (7) 1,053
----------------------------------------------------------------------------
General and administrative 63 23 65 151
----------------------------------------------------------------------------
Share-based payments - - 15 15
----------------------------------------------------------------------------
(Earnings) loss from
associates and joint ventures (5) (10) 1 (14)
----------------------------------------------------------------------------
Other (income) expenses (20) (5) 27 2
----------------------------------------------------------------------------
Earnings (loss) before finance costs
and income taxes 659 369 (80) 948
----------------------------------------------------------------------------
Finance costs - - 63 63
----------------------------------------------------------------------------
Earnings (loss) before income taxes 659 369 (143) 885
----------------------------------------------------------------------------
Depreciation and amortization 149 114 6 269
----------------------------------------------------------------------------
Finance costs - - 63 63
----------------------------------------------------------------------------
EBITDA (2) 808 483 (74) 1,217
----------------------------------------------------------------------------
Share of joint ventures
----------------------------------------------------------------------------
Finance costs and income taxes - 12 - 12
----------------------------------------------------------------------------
Depreciation and amortization - 5 - 5
----------------------------------------------------------------------------
Adjusted EBITDA 808 500 (74) 1,234
----------------------------------------------------------------------------
(1) Includes inter-segment eliminations.
(2) Earnings (loss) from continuing operations before finance costs, income
taxes, depreciation and amortization.
Segment information - Retail Three months ended June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
North
America International Retail
----------------------------------------------------------------------------
Sales - external 5,405 739 6,144
----------------------------------------------------------------------------
- inter-segment 16 - 16
----------------------------------------------------------------------------
Total sales 5,421 739 6,160
----------------------------------------------------------------------------
Cost of product sold 4,286 610 4,896
----------------------------------------------------------------------------
Gross profit 1,135 129 1,264
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 489 91 580
----------------------------------------------------------------------------
General and administrative 23 9 32
----------------------------------------------------------------------------
Earnings from associates and joint
ventures (2) (1) (3)
----------------------------------------------------------------------------
Other expenses (income) 15 (7) 8
----------------------------------------------------------------------------
Earnings before income taxes 610 37 647
----------------------------------------------------------------------------
Depreciation and amortization 57 9 66
----------------------------------------------------------------------------
EBITDA 667 46 713
----------------------------------------------------------------------------
Adjusted EBITDA 667 46 713
----------------------------------------------------------------------------
Segment information - Retail Three months ended June 30,
----------------------------------------------------------------------------
2014
----------------------------------------------------------------------------
North
America International Retail
----------------------------------------------------------------------------
Sales - external 5,508 884 6,392
----------------------------------------------------------------------------
- inter-segment 5 - 5
----------------------------------------------------------------------------
Total sales 5,513 884 6,397
----------------------------------------------------------------------------
Cost of product sold 4,313 735 5,048
----------------------------------------------------------------------------
Gross profit 1,200 149 1,349
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 502 101 603
----------------------------------------------------------------------------
General and administrative 23 12 35
----------------------------------------------------------------------------
Earnings from associates and joint
ventures (3) (1) (4)
----------------------------------------------------------------------------
Other expenses (income) 5 (4) 1
----------------------------------------------------------------------------
Earnings before income taxes 673 41 714
----------------------------------------------------------------------------
Depreciation and amortization 69 8 77
----------------------------------------------------------------------------
EBITDA 742 49 791
----------------------------------------------------------------------------
Adjusted EBITDA 742 49 791
----------------------------------------------------------------------------
Segment information - Retail Six months ended June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
North
America International Retail
----------------------------------------------------------------------------
Sales - external 7,178 1,226 8,404
----------------------------------------------------------------------------
- inter-segment 19 - 19
----------------------------------------------------------------------------
Total sales 7,197 1,226 8,423
----------------------------------------------------------------------------
Cost of product sold 5,789 999 6,788
----------------------------------------------------------------------------
Gross profit 1,408 227 1,635
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 834 169 1,003
----------------------------------------------------------------------------
General and administrative 40 18 58
----------------------------------------------------------------------------
Earnings from associates and joint
ventures (3) (1) (4)
----------------------------------------------------------------------------
Other expenses (income) 12 (16) (4)
----------------------------------------------------------------------------
Earnings before income taxes 525 57 582
----------------------------------------------------------------------------
Depreciation and amortization 109 14 123
----------------------------------------------------------------------------
EBITDA 634 71 705
----------------------------------------------------------------------------
Adjusted EBITDA 634 71 705
----------------------------------------------------------------------------
Segment information - Retail Six months ended June 30,
----------------------------------------------------------------------------
2014
----------------------------------------------------------------------------
North
America International Retail
----------------------------------------------------------------------------
Sales - external 7,224 1,395 8,619
----------------------------------------------------------------------------
- inter-segment 10 - 10
----------------------------------------------------------------------------
Total sales 7,234 1,395 8,629
----------------------------------------------------------------------------
Cost of product sold 5,751 1,142 6,893
----------------------------------------------------------------------------
Gross profit 1,483 253 1,736
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 851 188 1,039
----------------------------------------------------------------------------
General and administrative 40 23 63
----------------------------------------------------------------------------
Earnings from associates and joint
ventures (3) (2) (5)
----------------------------------------------------------------------------
Other expenses (income) 4 (24) (20)
----------------------------------------------------------------------------
Earnings before income taxes 591 68 659
----------------------------------------------------------------------------
Depreciation and amortization 132 17 149
----------------------------------------------------------------------------
EBITDA 723 85 808
----------------------------------------------------------------------------
Adjusted EBITDA 723 85 808
----------------------------------------------------------------------------
Segment information -
Wholesale Three months ended June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
Wholesale
Nitrogen Potash Phosphate Other (1) Wholesale
----------------------------------------------------------------------------
Sales - external 415 112 118 203 848
----------------------------------------------------------------------------
- inter-segment 138 54 74 60 326
----------------------------------------------------------------------------
Total sales 553 166 192 263 1,174
----------------------------------------------------------------------------
Cost of product sold 283 98 163 221 765
----------------------------------------------------------------------------
Gross profit 270 68 29 42 409
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 4 2 1 2 9
----------------------------------------------------------------------------
General and
administrative 2 1 1 2 6
----------------------------------------------------------------------------
Earnings from
associates and joint
ventures - - - - -
----------------------------------------------------------------------------
Other expenses
(income) 8 6 1 (1) 14
----------------------------------------------------------------------------
Earnings (loss) before
income taxes 256 59 26 39 380
----------------------------------------------------------------------------
Depreciation and
amortization 20 13 11 5 49
----------------------------------------------------------------------------
EBITDA 276 72 37 44 429
----------------------------------------------------------------------------
Share of joint ventures
----------------------------------------------------------------------------
Finance costs and
income taxes 4 - - - 4
----------------------------------------------------------------------------
Depreciation and
amortization 5 - - - 5
----------------------------------------------------------------------------
Adjusted EBITDA 285 72 37 44 438
----------------------------------------------------------------------------
Segment information -
Wholesale Three months ended June 30,
----------------------------------------------------------------------------
2014
----------------------------------------------------------------------------
Wholesale
Nitrogen Potash Phosphate Other (1)Wholesale
----------------------------------------------------------------------------
Sales - external 301 123 110 412 946
----------------------------------------------------------------------------
- inter-segment 120 52 51 43 266
----------------------------------------------------------------------------
Total sales 421 175 161 455 1,212
----------------------------------------------------------------------------
Cost of product sold 320 103 155 407 985
----------------------------------------------------------------------------
Gross profit 101 72 6 48 227
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 3 2 2 3 10
----------------------------------------------------------------------------
General and
administrative 4 3 3 3 13
----------------------------------------------------------------------------
Earnings from
associates and joint
ventures - - - (10) (10)
----------------------------------------------------------------------------
Other expenses
(income) 9 5 10 (1) 23
----------------------------------------------------------------------------
Earnings (loss) before
income taxes 85 62 (9) 53 191
----------------------------------------------------------------------------
Depreciation and
amortization 22 18 13 8 61
----------------------------------------------------------------------------
EBITDA 107 80 4 61 252
----------------------------------------------------------------------------
Share of joint ventures
----------------------------------------------------------------------------
Finance costs and
income taxes 8 - - - 8
----------------------------------------------------------------------------
Depreciation and
amortization 3 - - - 3
----------------------------------------------------------------------------
Adjusted EBITDA 118 80 4 61 263
----------------------------------------------------------------------------
(1) Includes product purchased for resale, ammonium sulfate, ESN and other
products.
Segment information -
Wholesale Six months ended June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
Wholesale
Nitrogen Potash Phosphate Other (1) Wholesale
----------------------------------------------------------------------------
Sales - external 633 137 228 462 1,460
----------------------------------------------------------------------------
- inter-segment 235 96 145 105 581
----------------------------------------------------------------------------
Total sales 868 233 373 567 2,041
----------------------------------------------------------------------------
Cost of product sold 455 158 299 486 1,398
----------------------------------------------------------------------------
Gross profit 413 75 74 81 643
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 8 3 2 7 20
----------------------------------------------------------------------------
General and
administrative 5 3 3 5 16
----------------------------------------------------------------------------
Loss (earnings) from
associates and joint
ventures - - - 3 3
----------------------------------------------------------------------------
Other expense
(income) 6 11 13 (38) (8)
----------------------------------------------------------------------------
Earnings (loss) before
income taxes 394 58 56 104 612
----------------------------------------------------------------------------
Depreciation and
amortization 38 27 24 10 99
----------------------------------------------------------------------------
EBITDA 432 85 80 114 711
----------------------------------------------------------------------------
Share of joint ventures
----------------------------------------------------------------------------
Finance costs and
income taxes 5 - - - 5
----------------------------------------------------------------------------
Depreciation and
amortization 8 - - - 8
----------------------------------------------------------------------------
Adjusted EBITDA 445 85 80 114 724
----------------------------------------------------------------------------
Segment information -
Wholesale Six months ended June 30,
----------------------------------------------------------------------------
2014
----------------------------------------------------------------------------
Wholesale
Nitrogen Potash Phosphate Other (1) Wholesale
----------------------------------------------------------------------------
Sales - external 556 206 222 814 1,798
----------------------------------------------------------------------------
- inter-segment 201 97 106 71 475
----------------------------------------------------------------------------
Total sales 757 303 328 885 2,273
----------------------------------------------------------------------------
Cost of product sold 566 185 320 804 1,875
----------------------------------------------------------------------------
Gross profit 191 118 8 81 398
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 6 4 3 8 21
----------------------------------------------------------------------------
General and
administrative 6 5 5 7 23
----------------------------------------------------------------------------
Loss (earnings) from
associates and joint
ventures - - - (10) (10)
----------------------------------------------------------------------------
Other expense
(income) (24) 11 9 (1) (5)
----------------------------------------------------------------------------
Earnings (loss) before
income taxes 203 98 (9) 77 369
----------------------------------------------------------------------------
Depreciation and
amortization 42 31 26 15 114
----------------------------------------------------------------------------
EBITDA 245 129 17 92 483
----------------------------------------------------------------------------
Share of joint ventures
----------------------------------------------------------------------------
Finance costs and
income taxes 12 - - - 12
----------------------------------------------------------------------------
Depreciation and
amortization 5 - - - 5
----------------------------------------------------------------------------
Adjusted EBITDA 262 129 17 92 500
----------------------------------------------------------------------------
(1) Includes product purchased for resale, ammonium sulfate, ESN and other
products.
Gross profit by product
line Three months ended June 30,
----------------------------------------------------------------------------
2015 2014
----------------------------------------------------------------------------
Cost of Cost of
product Gross product Gross
Sales sold profit Sales sold profit
----------------------------------------------------------------------------
Retail
----------------------------------------------------------------------------
Crop nutrients 2,608 2,154 454 2,708 2,203 505
----------------------------------------------------------------------------
Crop protection
products 2,169 1,712 457 2,199 1,742 457
----------------------------------------------------------------------------
Seed 982 818 164 1,038 842 196
----------------------------------------------------------------------------
Merchandise 174 147 27 218 194 24
----------------------------------------------------------------------------
Services and other 227 65 162 234 67 167
----------------------------------------------------------------------------
6,160 4,896 1,264 6,397 5,048 1,349
----------------------------------------------------------------------------
Wholesale
----------------------------------------------------------------------------
Nitrogen 553 283 270 421 320 101
----------------------------------------------------------------------------
Potash 166 98 68 175 103 72
----------------------------------------------------------------------------
Phosphate 192 163 29 161 155 6
----------------------------------------------------------------------------
Product purchased for
resale 104 103 1 285 273 12
----------------------------------------------------------------------------
Ammonium sulfate, ESN
and other 159 118 41 170 134 36
----------------------------------------------------------------------------
1,174 765 409 1,212 985 227
----------------------------------------------------------------------------
Other inter-segment
eliminations (342) (377) 35 (271) (294) 23
----------------------------------------------------------------------------
Total 6,992 5,284 1,708 7,338 5,739 1,599
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Wholesale share of joint
ventures
----------------------------------------------------------------------------
Nitrogen 45 39 6 49 35 14
----------------------------------------------------------------------------
Product purchased for
resale 12 12 - 17 16 1
----------------------------------------------------------------------------
57 51 6 66 51 15
----------------------------------------------------------------------------
Total Wholesale
including proportionate
share in joint ventures 1,231 816 415 1,278 1,036 242
----------------------------------------------------------------------------
Gross profit by product
line Six months ended June 30,
----------------------------------------------------------------------------
2015 2014
----------------------------------------------------------------------------
Cost of Cost of
product Gross product Gross
Sales sold profit Sales sold profit
----------------------------------------------------------------------------
Retail
----------------------------------------------------------------------------
Crop nutrients 3,519 2,939 580 3,604 2,971 633
----------------------------------------------------------------------------
Crop protection
products 2,962 2,397 565 2,929 2,367 562
----------------------------------------------------------------------------
Seed 1,290 1,086 204 1,336 1,094 242
----------------------------------------------------------------------------
Merchandise 316 269 47 404 356 48
----------------------------------------------------------------------------
Services and other 336 97 239 356 105 251
----------------------------------------------------------------------------
8,423 6,788 1,635 8,629 6,893 1,736
----------------------------------------------------------------------------
Wholesale
----------------------------------------------------------------------------
Nitrogen 868 455 413 757 566 191
----------------------------------------------------------------------------
Potash 233 158 75 303 185 118
----------------------------------------------------------------------------
Phosphate 373 299 74 328 320 8
----------------------------------------------------------------------------
Product purchased for
resale 296 288 8 579 563 16
----------------------------------------------------------------------------
Ammonium sulfate, ESN
and other 271 198 73 306 241 65
----------------------------------------------------------------------------
2,041 1,398 643 2,273 1,875 398
----------------------------------------------------------------------------
Other inter-segment
eliminations (600) (614) 14 (485) (506) 21
----------------------------------------------------------------------------
Total 9,864 7,572 2,292 10,417 8,262 2,155
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Wholesale share of joint
ventures
----------------------------------------------------------------------------
Nitrogen 66 61 5 76 53 23
----------------------------------------------------------------------------
Product purchased for
resale 38 37 1 38 36 2
----------------------------------------------------------------------------
104 98 6 114 89 25
----------------------------------------------------------------------------
Total Wholesale
including proportionate
share in joint ventures 2,145 1,496 649 2,387 1,964 423
----------------------------------------------------------------------------
Selected volumes and per
tonne information Three months ended June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's) ($/tonne) ($/tonne) ($/tonne)
----------------------------------------------------------------------------
Retail
----------------------------------------------------------------------------
Crop nutrients
----------------------------------------------------------------------------
North America 4,144 550 446 104
----------------------------------------------------------------------------
International 722 454 421 33
----------------------------------------------------------------------------
Total crop nutrients 4,866 536 443 93
----------------------------------------------------------------------------
Wholesale
----------------------------------------------------------------------------
Nitrogen
----------------------------------------------------------------------------
North America
----------------------------------------------------------------------------
Ammonia 441 584
----------------------------------------------------------------------------
Urea 471 419
----------------------------------------------------------------------------
Other 311 313
----------------------------------------------------------------------------
Total nitrogen 1,223 451 231 220
----------------------------------------------------------------------------
Potash
----------------------------------------------------------------------------
North America 334 371
----------------------------------------------------------------------------
International 175 243
----------------------------------------------------------------------------
Total potash 509 327 193 134
----------------------------------------------------------------------------
Phosphate 290 665 563 102
----------------------------------------------------------------------------
Product purchased for
resale 282 369 367 2
----------------------------------------------------------------------------
Ammonium sulfate 96 386 164 222
----------------------------------------------------------------------------
ESN and other 244
----------------------------------------------------------------------------
Total Wholesale 2,644 444 289 155
----------------------------------------------------------------------------
Wholesale share of joint
ventures
----------------------------------------------------------------------------
Nitrogen 114 395 338 57
----------------------------------------------------------------------------
Product purchased for
resale 32 351 341 10
----------------------------------------------------------------------------
146 386 339 47
----------------------------------------------------------------------------
Total Wholesale including
proportionate share in
joint ventures 2,790 441 292 149
----------------------------------------------------------------------------
Selected volumes and per
tonne information Three months ended June 30,
----------------------------------------------------------------------------
2014
----------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's) ($/tonne) ($/tonne) ($/tonne)
----------------------------------------------------------------------------
Retail
----------------------------------------------------------------------------
Crop nutrients
----------------------------------------------------------------------------
North America 4,161 558 443 115
----------------------------------------------------------------------------
International 758 512 475 37
----------------------------------------------------------------------------
Total crop nutrients 4,919 551 448 103
----------------------------------------------------------------------------
Wholesale
----------------------------------------------------------------------------
Nitrogen
----------------------------------------------------------------------------
North America
----------------------------------------------------------------------------
Ammonia 323 577
----------------------------------------------------------------------------
Urea 243 474
----------------------------------------------------------------------------
Other 340 351
----------------------------------------------------------------------------
Total nitrogen 906 464 353 111
----------------------------------------------------------------------------
Potash
----------------------------------------------------------------------------
North America 372 358
----------------------------------------------------------------------------
International 194 218
----------------------------------------------------------------------------
Total potash 566 310 182 128
----------------------------------------------------------------------------
Phosphate 268 598 576 22
----------------------------------------------------------------------------
Product purchased for
resale 683 418 400 18
----------------------------------------------------------------------------
Ammonium sulfate 106 360 169 191
----------------------------------------------------------------------------
ESN and other 251
----------------------------------------------------------------------------
Total Wholesale 2,780 436 354 82
----------------------------------------------------------------------------
Wholesale share of joint
ventures
----------------------------------------------------------------------------
Nitrogen 124 399 290 109
----------------------------------------------------------------------------
Product purchased for
resale 88 193 175 18
----------------------------------------------------------------------------
212 313 242 71
----------------------------------------------------------------------------
Total Wholesale including
proportionate share in
joint ventures 2,992 427 346 81
----------------------------------------------------------------------------
Selected volumes and per
tonne information Six months ended June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's) ($/tonne) ($/tonne) ($/tonne)
----------------------------------------------------------------------------
Retail
----------------------------------------------------------------------------
Crop nutrients
----------------------------------------------------------------------------
North America 5,579 540 442 98
----------------------------------------------------------------------------
International 1,174 431 400 31
----------------------------------------------------------------------------
Total crop nutrients 6,753 521 435 86
----------------------------------------------------------------------------
Wholesale
----------------------------------------------------------------------------
Nitrogen
----------------------------------------------------------------------------
North America
----------------------------------------------------------------------------
Ammonia 616 569
----------------------------------------------------------------------------
Urea 819 420
----------------------------------------------------------------------------
Other 549 316
----------------------------------------------------------------------------
Total nitrogen 1,984 437 229 208
----------------------------------------------------------------------------
Potash
----------------------------------------------------------------------------
North America 483 378
----------------------------------------------------------------------------
International 211 240
----------------------------------------------------------------------------
Total potash 694 336 228 108
----------------------------------------------------------------------------
Phosphate 572 652 522 130
----------------------------------------------------------------------------
Product purchased for
resale 830 356 347 9
----------------------------------------------------------------------------
Ammonium sulfate 178 362 150 212
----------------------------------------------------------------------------
ESN and other 420
----------------------------------------------------------------------------
Total Wholesale 4,678 436 299 137
----------------------------------------------------------------------------
Wholesale share of joint
ventures
----------------------------------------------------------------------------
Nitrogen 166 399 367 32
----------------------------------------------------------------------------
Product purchased for
resale 117 321 309 12
----------------------------------------------------------------------------
283 367 343 24
----------------------------------------------------------------------------
Total Wholesale including
proportionate sharein joint
ventures 4,961 432 301 131
----------------------------------------------------------------------------
Selected volumes and per
tonne information Six months ended June 30,
----------------------------------------------------------------------------
2014
----------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's) ($/tonne) ($/tonne) ($/tonne)
----------------------------------------------------------------------------
Retail
----------------------------------------------------------------------------
Crop nutrients
----------------------------------------------------------------------------
North America 5,561 544 438 106
----------------------------------------------------------------------------
International 1,184 491 455 36
----------------------------------------------------------------------------
Total crop nutrients 6,745 534 440 94
----------------------------------------------------------------------------
Wholesale
----------------------------------------------------------------------------
Nitrogen
----------------------------------------------------------------------------
North America
----------------------------------------------------------------------------
Ammonia 502 549
----------------------------------------------------------------------------
Urea 625 454
----------------------------------------------------------------------------
Other 571 346
----------------------------------------------------------------------------
Total nitrogen 1,698 446 334 112
----------------------------------------------------------------------------
Potash
----------------------------------------------------------------------------
North America 664 351
----------------------------------------------------------------------------
International 330 213
----------------------------------------------------------------------------
Total potash 994 305 186 119
----------------------------------------------------------------------------
Phosphate 576 569 555 14
----------------------------------------------------------------------------
Product purchased for
resale 1,488 389 378 11
----------------------------------------------------------------------------
Ammonium sulfate 198 335 171 164
----------------------------------------------------------------------------
ESN and other 462
----------------------------------------------------------------------------
Total Wholesale 5,416 420 347 73
----------------------------------------------------------------------------
Wholesale share of joint
ventures
----------------------------------------------------------------------------
Nitrogen 186 410 287 123
----------------------------------------------------------------------------
Product purchased for
resale 152 250 236 14
----------------------------------------------------------------------------
338 338 264 74
----------------------------------------------------------------------------
Total Wholesale including
proportionate sharein joint
ventures 5,754 415 342 73
----------------------------------------------------------------------------
3. Expenses
Three months ended Six months ended
Other expenses June 30, June 30,
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
Loss (gain) on derivatives not
designated as hedges, net of
foreign exchange 1 (2) - (37)
----------------------------------------------------------------------------
Interest income (16) (19) (33) (30)
----------------------------------------------------------------------------
Gain on sale of assets - - (38) -
----------------------------------------------------------------------------
Environmental remediation and asset
retirement obligations - 22 9 20
----------------------------------------------------------------------------
Bad debt expense 25 25 32 30
----------------------------------------------------------------------------
Potash profit and capital tax 5 3 10 6
----------------------------------------------------------------------------
Other 11 13 13 13
----------------------------------------------------------------------------
26 42 (7) 2
----------------------------------------------------------------------------
4. Earnings per Share
Three months ended Six months ended
Attributable to equity holders of
Agrium June 30, June 30,
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
Numerator
----------------------------------------------------------------------------
Net earnings from continuing
operations 674 624 686 635
----------------------------------------------------------------------------
Net loss from discontinued
operations - (9) - (18)
----------------------------------------------------------------------------
Net earnings 674 615 686 617
----------------------------------------------------------------------------
Denominator (millions)
----------------------------------------------------------------------------
Weighted average number of shares
outstanding for basic and diluted
earnings per share 143 144 143 144
----------------------------------------------------------------------------
5. Debt
June 30, December 31,
----------------------------------------------------------------------------
2015 2014
----------------------------------------------------------------------------
Rate (%)
Maturity (1)
----------------------------------------------------------------------------
Short-term debt
----------------------------------------------------------------------------
Commercial paper 2015 0.52 535 1,117
----------------------------------------------------------------------------
Credit facilities 4.43 146 410
----------------------------------------------------------------------------
681 1,527
----------------------------------------------------------------------------
(1) Weighted average rates at June 30, 2015.
Debentures issued during the three months ended March 31, 2015
Maturity Rate (%) Principal ---------------------------------------------------------------------------- March 15, 2025 3.375 550 ---------------------------------------------------------------------------- March 15, 2035 4.125 450 ----------------------------------------------------------------------------
6. Financial Instruments
Commodity price risk
Natural gas derivative financial instruments outstanding (notional amounts in millions of MMBtu)
June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
Average Fair value
contract of assets
Notional Maturities price (1) (liabilities)
----------------------------------------------------------------------------
Not designated as hedges
----------------------------------------------------------------------------
NYMEX swaps - - - -
----------------------------------------------------------------------------
AECO swaps - - - -
----------------------------------------------------------------------------
-
----------------------------------------------------------------------------
Designated as hedges
----------------------------------------------------------------------------
AECO swaps 90 2015 - 2018 2.96 (43)
----------------------------------------------------------------------------
(43)
----------------------------------------------------------------------------
(1) USD per MMBtu.
December 31,
----------------------------------------------------------------------------
2014
----------------------------------------------------------------------------
Average Fair value
contract of assets
Notional Maturities price (1) (liabilities)
----------------------------------------------------------------------------
Not designated as hedges
----------------------------------------------------------------------------
NYMEX swaps 1 2015 3.83 (1)
----------------------------------------------------------------------------
AECO swaps 10 2015 3.40 (10)
----------------------------------------------------------------------------
(11)
----------------------------------------------------------------------------
Designated as hedges
----------------------------------------------------------------------------
AECO swaps 69 2015 - 2018 3.32 (25)
----------------------------------------------------------------------------
(25)
----------------------------------------------------------------------------
(1) USD per MMBtu.
Fair value of assets (liabilities)
----------------------------------------
Maturities of natural gas derivative
contracts 2015 2016 2017 2018
----------------------------------------------------------------------------
Designated as hedges (3) (16) (13) (11)
----------------------------------------------------------------------------
Impact of change in fair value of natural gas
derivative financial instruments June 30, December 31,
----------------------------------------------------------------------------
2015 2014
----------------------------------------------------------------------------
A $10-million impact to net earnings requires
movement in gas prices per MMBtu - 1.23
----------------------------------------------------------------------------
A $10-million impact to other comprehensive income
requires movement in gas
prices per MMBtu 1.18 0.19
----------------------------------------------------------------------------
Use of derivatives to hedge exposure to natural gas market price risk
----------------------------------------------------------------------------
Term (gas year - 12 months ending
October 31) 2015 2016 2017 2018
----------------------------------------------------------------------------
Maximum allowable (% of forecasted
gas requirements) 75 75 75 25(1)
----------------------------------------------------------------------------
Forecasted average monthly natural
gas consumption
(millions of MMBtu) 8 9 9 9
----------------------------------------------------------------------------
Gas requirements hedged using
derivatives designated as hedges
(%) 37 25 25 17
----------------------------------------------------------------------------
(1) Maximum monthly hedged volume may not exceed 90 percent of planned
monthly requirements.
For our natural gas derivatives designated in hedging relationships, the underlying risk of the forward contracts is identical to the hedged risk, and accordingly we have established a hedge ratio of 1:1. Due to a strong correlation between AECO future contract prices and our delivered cost, we did not experience any ineffectiveness on our hedges, and accordingly we have recorded the full change in the fair value of natural gas forward contracts designated as hedges to other comprehensive income.
Currency risk
Foreign exchange derivative financial instruments outstanding (notional amounts in millions of U.S. dollars)
June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
Fair value
of assets
Sell/Buy Notional Maturities (liabilities)
----------------------------------------------------------------------------
Not designated as hedges
----------------------------------------------------------------------------
Forwards
----------------------------------------------------------------------------
USD/CAD 55 2015 -
----------------------------------------------------------------------------
CAD/USD 1,083 2015 11
----------------------------------------------------------------------------
USD/AUD 4 2015 -
----------------------------------------------------------------------------
Swaps
----------------------------------------------------------------------------
USD/AUD 12 2015 -
----------------------------------------------------------------------------
AUD/USD 8 2015 -
----------------------------------------------------------------------------
Options
----------------------------------------------------------------------------
USD/CAD - buy USD puts 155 2015 1
----------------------------------------------------------------------------
USD/CAD - sell USD calls
(1) 155 2015 (1)
----------------------------------------------------------------------------
11
----------------------------------------------------------------------------
December 31,
----------------------------------------------------------------------------
2014
----------------------------------------------------------------------------
Fair value
of assets
Sell/Buy Notional Maturities (liabilities)
----------------------------------------------------------------------------
Not designated as hedges
----------------------------------------------------------------------------
Forwards
----------------------------------------------------------------------------
USD/CAD - - -
----------------------------------------------------------------------------
CAD/USD 1,675 2015 31
----------------------------------------------------------------------------
USD/AUD 33 2015 (3)
----------------------------------------------------------------------------
Swaps
----------------------------------------------------------------------------
USD/AUD 26 2015 (1)
----------------------------------------------------------------------------
AUD/USD 21 2015 2
----------------------------------------------------------------------------
Options
----------------------------------------------------------------------------
USD/CAD - buy USD puts - - -
----------------------------------------------------------------------------
USD/CAD - sell USD calls
(1) - - -
----------------------------------------------------------------------------
29
----------------------------------------------------------------------------
(1) Includes 75M notional of enhanced collars.
June 30,
---------------------------------------------
2015
---------------------------------------------
Fair value Carrying
---------------------------------------------
Financial instruments measured
at fair value on a recurring
basis Level 1 Level 2 value
----------------------------------------------------------------------------
Cash and cash equivalents - 647 647
----------------------------------------------------------------------------
Accounts receivable -
derivatives - 12 12
----------------------------------------------------------------------------
Other current financial assets
-marketable securities 20 113 133
----------------------------------------------------------------------------
Accounts payable - derivatives - 12 12
----------------------------------------------------------------------------
Other financial liabilities -
derivatives - 32 32
----------------------------------------------------------------------------
Other financial instruments
----------------------------------------------------------------------------
Current portion of long-term
debt
----------------------------------------------------------------------------
Floating rate debt -
amortized cost - 1 1
----------------------------------------------------------------------------
Long-term debt
----------------------------------------------------------------------------
Debentures - amortized cost - 4,640 4,468
----------------------------------------------------------------------------
Fixed and floating rate debt
- amortized cost - 65 65
----------------------------------------------------------------------------
December 31,
---------------------------------------------
2014
---------------------------------------------
Fair value Carrying
---------------------------------------------
Financial instruments measured
at fair value on a recurring
basis Level 1 Level 2 value
----------------------------------------------------------------------------
Cash and cash equivalents - 848 848
----------------------------------------------------------------------------
Accounts receivable -
derivatives - 33 33
----------------------------------------------------------------------------
Other current financial assets
-marketable securities 20 70 90
----------------------------------------------------------------------------
Accounts payable - derivatives - 18 18
----------------------------------------------------------------------------
Other financial liabilities -
derivatives - 22 22
----------------------------------------------------------------------------
Other financial instruments
----------------------------------------------------------------------------
Current portion of long-term
debt
----------------------------------------------------------------------------
Floating rate debt -
amortized cost - 11 11
----------------------------------------------------------------------------
Long-term debt
----------------------------------------------------------------------------
Debentures - amortized cost - 3,879 3,483
----------------------------------------------------------------------------
Fixed and floating rate debt
- amortized cost - 76 76
----------------------------------------------------------------------------
There have been no transfers between Level 1 and Level 2 fair value measurements in the six months ended June 30, 2015 or June 30, 2014. We do not measure any of our financial instruments using Level 3 inputs.
7. Additional Information
Property, plant and equipment
At the end of 2014, we completed a major turnaround to tie in the expansion project at our Vanscoy potash facility and the assets related to the expansion project became available for use in 2015. During the six months ended June 30, 2015 we transferred $2.6-billion related to the Vanscoy expansion project from assets under construction to buildings and improvements, and machinery and equipment.
During the six months ended June 30, 2015, we added $192-million to assets under construction related to the expansion project at our Borger Nitrogen facility.
Dividends
June 30,
----------------------------------------------------------------------------
2015
----------------------------------------------------------------------------
Declared
----------------------------------------------
Paid to
Effective Per share Total Shareholders Total
----------------------------------------------------------------------------
December 11, 2014 0.78 112 January 21, 2015 109
----------------------------------------------------------------------------
February 24, 2015 0.78 112 April 16, 2015 114
----------------------------------------------------------------------------
May 5, 2015 0.875 125 July 16, 2015 N/A
----------------------------------------------------------------------------
In May 2015, our Board of Directors approved an increase to our dividend to $3.50 U.S. per common share on an annualized basis.
Normal course issuer bid
In January 2015, the Toronto Stock Exchange accepted our Normal Course Issuer Bid ("NCIB"). Under the NCIB, we may purchase for cancellation up to 5 percent of our currently issued and outstanding common shares until January 25, 2016. The actual number of shares purchased will be at Agrium's discretion and will depend on market conditions, share prices, Agrium's cash position and other factors. During the six months ended June 30, 2015, we purchased 952,053 shares at an average share price of $104.99 for total consideration of $100-million.
8. Recent Accounting Pronouncements
The International Accounting Standards Board deferred the effective date of IFRS 15 Revenue from Contracts with Customers by one year. Accordingly, Agrium expects to apply IFRS 15 for the annual reporting period beginning on January 1, 2018. We are continuing to evaluate the impact on adoption.
Contacts:
Agrium Inc.
Investor/Media Relations:
Richard Downey
Vice President, Investor & Corporate Relations
(403) 225-7357
Agrium Inc.
Todd Coakwell
Director, Investor Relations
(403) 225-7437
Agrium Inc.
Louis Brown
Analyst, Investor Relations
(403) 225-7761
www.agrium.com
