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CALGARY, ALBERTA--(Marketwired - May 6, 2014) -
ALL AMOUNTS ARE STATED IN U.S.$
Agrium Inc. AGU AGU announced today consolidated net earnings ("net earnings") from continuing operations of $12-million ($0.08 diluted earnings per share) for the first quarter of 2014, compared with net earnings from continuing operations of $146-million in the first quarter of 2013 ($0.98 diluted earnings per share).
The 2014 first quarter results included a $31-million ($0.15 diluted earnings per share) share-based payments expense offset by net hedging gains of $32-million ($0.16 diluted earnings per share) on natural gas hedge positions. Excluding these items, net earnings from continuing operations would have been at $11-million ($0.07 diluted earnings per share).(1)
"Agrium's first quarter is traditionally our seasonally lowest earnings quarter and this was exacerbated this year by the record cold winter across North America. However, farmer sentiment is positive this spring and we are now seeing good demand for crop input products and services. Agrium achieved a record $788-million in operating cash flow this quarter, despite the lower net earnings, as we continue to focus on reducing working capital needs," commented Chuck Magro, Agrium's President and CEO.
Agrium is providing guidance for the second quarter of 2014 of $3.85 to $4.35 diluted earnings per share from continuing operations. This excludes derivative gains or losses and share-based payments expense in our estimated second quarter results.(2) The outage at our Carseland nitrogen plant is expected to impact second quarter earnings due to lost production and higher costs. The expected financial impact from the Carseland outage is estimated at $0.35 diluted earnings per share in the second quarter.(2)
(1) First quarter effective tax rate of 29 percent used for adjusted diluted earnings per share calculation.
(2) See disclosure in the section "Outlook, Key Risks and Uncertainties" in our 2014 first quarter Management's Discussion and Analysis and additional assumptions outlined on the following page.
MANAGEMENT'S DISCUSSION AND ANALYSIS
May 6, 2014
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 first quarter of 2014 (three months ended March 31, 2014) are against results for the first quarter of 2013 (three months ended March 31, 2013). All dollar amounts refer to United States ("U.S.") dollars except where otherwise stated. The financial measures EBITDA and Adjusted EBITDA used in this MD&A are not prescribed by IFRS, or in the case of EBIT is an Additional IFRS financial measure. Such measures are defined in the "Additional IFRS and Non-IFRS Financial Measures" section of this MD&A.
The following interim MD&A is as of May 6, 2014 and should be read in conjunction with the Consolidated Interim Financial Statements for the three months ended March 31, 2014 (the "Consolidated Financial Statements"), and the annual MD&A and financial statements for the year ended December 31, 2013 included in our 2013 Annual Report to Shareholders to which readers are referred. The Board of Directors carries out its responsibility for review of this disclosure principally through its Audit Committee, comprised exclusively of independent directors. The Audit Committee reviews, and prior to publication, approves 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 an item is not material or 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 "Outlook, Key Risks and Uncertainties" section of this MD&A.
The major assumptions made in preparing our second quarter guidance are outlined below and include but are not limited to:
-- North American weather patterns will support condensed spring
applications;
-- North America Wholesale fertilizer realized selling prices across all
nutrients will be substantially lower than realized in the second
quarter of 2013;
-- North America Wholesale produced nitrogen sales volumes will be
approximately 15 percent lower than the sales volumes in the same
quarter of 2013, largely due to the outage at the Carseland nitrogen
facility that is expected to lower second quarter product availability
by approximately 130,000 tonnes of urea and 30,000 tonnes of ammonia;
-- The average NYMEX gas price will not deviate significantly from
approximately $4.50 per MMBtu;
-- North America Wholesale produced potash sales volumes will approximate
the sales volumes realized in the second quarter of 2013 while phosphate
sales volumes will be 10 to 15 percent lower than the sales volumes
realized in the second quarter of 2013;
-- Retail North America crop nutrients margin percentages will be higher
than the 19 percent realized in the second quarter of 2013;
-- Retail North America crop nutrients sales volumes will be approximately
25 percent higher than in the second quarter of 2013 due mainly to the
Viterra acquisition;
-- Retail North America crop protection products margin percentages will
approximate the 22 percent realized in the second quarter of 2013; and
-- Guidance is issued excluding the second quarter effects of:
-- Share-based payments;
-- Gains or losses on foreign exchange and derivative hedge positions;
and
-- Earnings or losses related to discontinued operations.
2014 First Quarter Operating Results
CONSOLIDATED NET EARNINGS
Agrium's 2014 first quarter net earnings from continuing operations were $12-million, or $0.08 diluted earnings per share from continuing operations, compared to net earnings from continuing operations of $146-million, or $0.98 diluted earnings per share from continuing operations, for the same quarter of 2013.
Financial Overview
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Three months ended March 31,
(millions of U.S. dollars, except
per share amounts and where noted) 2014 2013 Change % Change
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Sales 3,079 3,156 (77) (2)
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Gross profit 556 705 (149) (21)
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Expenses 503 466 37 8
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Earnings from continuing operations
before finance costs and income
taxes ("EBIT") 53 239 (186) (78)
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Net earnings from continuing
operations 12 146 (134) (92)
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Net loss from discontinued
operations (9) (5) (4) 80
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Net earnings 3 141 (138) (98)
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Diluted earnings per share from
continuing operations 0.08 0.98 (0.90) (92)
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Diluted loss per share from
discontinued operations (0.06) (0.04) (0.02) 50
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Diluted earnings per share 0.02 0.94 (0.92) (98)
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Effective tax rate (%) 29 27 N/A N/A
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Sales
Sales decreased by $77-million to $3.1-billion for the first quarter of 2014. Factors that affected our performance during the first quarter of 2014 compared to the first quarter of 2013 include the following:
-- Wholesale sales decreased by 11 percent to $1.1-billion due to lower
prices across all product lines consistent with benchmark pricing,
partially offset by higher sales volumes for urea, phosphate and potash;
and
-- Retail sales increased by 4 percent to $2.2-billion largely due to the
inclusion of results from Viterra Inc. ("Viterra") retail centers, which
accounted for $266-million in sales during the current quarter, and an
increase in crop nutrients sales volumes in Canada in the first quarter
of 2014 following a shorter fall application season. This was partially
offset by a decrease in crop protection sales primarily driven by
unfavorable weather conditions throughout North America in the first
quarter of 2014.
Gross Profit
Our gross profit for the first quarter of 2014 was $556-million, a decrease of $149-million compared to the first quarter of 2013. The main drivers of this variance consisted of the following:
-- Wholesale's gross profit decreased by $172-million for the first quarter
of 2014, compared to the first quarter of 2013 primarily as a result of
lower realized sales prices across all product lines consistent with
benchmark pricing, which was partially offset by higher sales volumes
from the carry forward of sales committed in the fourth quarter of 2013;
and
-- Retail's gross profit increased by $11-million to $387-million for the
first quarter of 2014, compared to the first quarter of 2013 due to the
inclusion of results from Viterra, coupled with higher sales of
livestock in Australia and the catch-up of crop nutrient sales volume in
Canada in the first quarter of 2014 following a shorter fall application
season. These were partially offset by lower crop protection sales due
to unfavorable weather conditions throughout North America.
Expenses
Expenses increased by $37-million for the first quarter of 2014 compared to the first quarter of 2013. This difference is primarily a result of the following items:
-- An increase in Retail selling expenses primarily driven by increased
costs of $50-million from the inclusion of Viterra results; and
-- An increase in general and administrative expenses due to a $15-million
increase in share-based payments expense driven by an appreciation in
share price in the first quarter of 2014.
The above increases in expenses were partially offset by a $24-million favorable change in commodity derivative gains. For further details, refer to the heading Wholesale in the section "Business Segment Performance".
Excluding Viterra, our Retail selling expenses would have been down $3-million, and our total expenses would have been $16-million lower.
The following table is a summary of our other expenses (income) for the first quarters of 2014 and 2013, respectively.
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Three months ended
March 31,
(millions of U.S. dollars) 2014 2013
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Realized and unrealized gain on commodity derivative
financial instruments (32) (8)
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Realized and unrealized gain on foreign exchange
derivative financial instruments (15) (13)
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Foreign exchange loss 12 19
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Interest income (11) (15)
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Environmental remediation and asset retirement
obligations (2) 1
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Bad debt expense 5 5
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Potash profit and capital tax 3 4
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Other - (4)
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(40) (11)
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Effective Tax Rate
The effective tax rate on continuing operations was 29 percent for the first quarter compared to 27 percent for the same period last year due to a decrease in income earned in low tax jurisdictions.
BUSINESS SEGMENT PERFORMANCE
Retail
Retail's 2014 first quarter sales were $2.2-billion ($1.7-billion from North America), which is an increase of 4 percent compared to sales of $2.1-billion ($1.6-billion from North America) for the same period last year. Total gross profit was $387-million in the first quarter of 2014, compared to the $376-million achieved in the same period last year. The increase in sales and gross profit was primarily due to the contribution from the Viterra acquisition and improved results in Australia. Retail reported EBITDA of $17-million in the first quarter of 2014, compared to $25-million in the first quarter of last year. The decline was due to the increase in operating costs associated with the acquired Viterra operations and the delayed spring season impacting U.S. retail results this quarter. It is important to note that the first quarter is normally a negative earnings period for Canadian agri-retail business, with the majority of the earnings from this business achieved in the second and third quarters. International Retail was the major contributor to EBITDA this quarter, with $36-million reported in the first quarter of 2014, compared to $4-million in the same period last year.
Total crop nutrient sales were $896-million this quarter, compared to $802-million in the first quarter of 2013. The increase was due to additional sales from the acquired Viterra operations and stronger sales in the Australian market. This was partially offset by lower crop nutrient prices in North America compared to the same period last year. Gross profit for crop nutrients was $128-million this quarter, up slightly from the $121-million reported in the first quarter of 2013. Total crop nutrient margins as a percentage of sales were 14.3 percent in the first quarter of 2014, compared to 15.1 percent in the same period last year. The decrease is primarily due to a lower proportion of sales coming from the U.S., which typically has higher margins.
Crop protection sales were $730-million in the first quarter of 2014, compared to the $786-million in sales reported in the same period last year. The decrease in sales was due to unfavorable weather conditions in North America which delayed the start of the spring season. Total crop protection gross profit this quarter was $105-million, compared to $128-million reported in the first quarter of 2013. The decrease in gross profit was due to lower overall sales volumes and a change in geographic, product and customer mix due to the late season. As a result, total crop protection margins as a percentage of sales declined to 14.4 percent this quarter, compared to 16.3 percent in the same period last year.
Seed sales were $298-million in the first quarter of 2014, an increase from the $285-million earned in the first quarter last year. Gross profit was $46-million this quarter, up from $44-million earned in the first quarter of 2013. The increased sales and gross profit from seed can be primarily attributed to contributions from Viterra's canola seed business, while the delayed spring season in the U.S. pushed some higher margin seed sales into the second quarter. Total seed margins as a percentage of sales were 15.4 percent in the first quarter of 2014, in line with the same quarter last year.
Sales of merchandise in the first quarter of 2014 were $186-million, compared to $120-million in the same period last year. The large increase was due to the addition of the Viterra fuel and equipment business lines. Gross profit for this product group was $24-million this quarter, an increase from the $22-million reported in the first quarter of 2013.
Services and other sales were $122-million this quarter, compared to the $146-million reported in the first quarter of 2013. The decrease in sales was due to lower sales within Australia, specifically the export of wool, which has been discontinued due to low returns on investment. Gross profit was $84-million in the first quarter of 2014, compared to $61-million for the same period last year. The higher gross profit is attributed to improved margins from the livestock markets and other services in Australia and stronger sales and margins for services and other sales in North America, despite the late start to the spring season.
Retail selling expenses for the first quarter of 2014 were $436-million, an increase of $47-million compared to the $389-million reported in the first quarter of last year. The increase was due to higher payroll and depreciation costs associated with the Viterra operations. International retail selling expenses declined approximately 8 percent in the first quarter of 2014 compared to the same period last year. Total selling expenses as a percentage of sales were 19.5 percent in the first quarter of 2014, compared to 18.2 percent reported in the first quarter last year. The increase is due to the seasonal earnings profile of the Viterra business, which has costs throughout the year, but generates the majority of its earnings in the second and third quarters. Selling expenses as a percentage of sales in the second quarter of 2014 is expected to be similar to or lower than the second quarter of 2013.
Wholesale
Wholesale's 2014 first quarter sales were $1.1-billion, down slightly from the $1.2-billion reported in the same quarter last year. Gross profit was $171-million this quarter, compared to $343-million in the first quarter of 2013. Wholesale Adjusted EBITDA was $237-million in the first quarter of 2014 compared to $393-million reported in the same period last year, with the reduction primarily due to lower sales prices for all major crop nutrients.
Nitrogen gross profit in the first quarter of 2014 was $100-million compared to $186-million in the same quarter last year. Nitrogen sales volumes were 876,000 tonnes in the first quarter of 2014, up 6 percent from the same period last year, primarily due to the carry forward of strong urea demand from the fourth quarter of 2013. This was partially offset by lower ammonia sales volumes compared to the prior year. Realized sales prices for nitrogen declined to $438 per tonne compared to $524 per tonne in the first quarter of 2013 as a result of reduced benchmark nitrogen prices in the fourth quarter of 2013 and the normal two to three month lag in our realized prices relative to these benchmark prices. Nitrogen cost of product sold was $324 per tonne this quarter, an increase from the $300 per tonne reported in the first quarter of 2013 due to higher natural gas costs. Our average nitrogen gross margins were $114 per tonne this quarter, compared to $224 per tonne in the same period last year.
Agrium's average natural gas cost included in cost of product sold (which includes transportation and administration costs) was $5.02/MMBtu this quarter ($4.29/MMBtu including the impact of realized gains on natural gas derivatives), compared to $3.33/MMBtu for the same period in 2013 ($3.54/MMBtu including the impact of realized losses on natural gas derivatives). Hedging gains or losses are included in other expenses and not in cost of product sold, thus are not part of the calculation of gross profit. The average U.S. benchmark (NYMEX) natural gas price for the first quarter of 2014 was $4.90/MMBtu, compared to $3.35/MMBtu in the same quarter last year. The AECO (Alberta) basis differential was a $0.56/MMBtu discount to NYMEX in the first quarter of 2014, an increase from the $0.28/MMBtu discount in the first quarter of 2013.
Agrium has forward hedged gas for approximately 15 to 20 percent of our expected natural gas requirements for the 2016 to 2018 time period at a price of approximately $3.50/MMBtu. Combined with our historical levels of industrial contracts, which have an inherent margin hedge correlated to indexed natural gas prices, this raises our total gas hedge position for this three-year period to approximately one-third of our total gas needs. While we believe North American gas prices will remain highly attractive in future years relative to other parts of the world, the forward strip on North American gas prices have declined to a point where we believe this will lock in highly competitive margins and reduce the longer-term risk profile.
Potash gross profit for the first quarter of 2014 was $46-million, compared to $84-million reported in the same quarter last year. The decrease was driven by lower benchmark and realized sales prices, as well as lower international sales volumes compared to the same period last year, which was partially offset by increased domestic sales volumes. Domestic sales volumes increased to 292,000 tonnes this quarter, compared to 198,000 tonnes in the first quarter of 2013, due to pent up demand in the market at the end of the fourth quarter of 2013. International sales volumes decreased to 136,000 tonnes, compared to 180,000 tonnes in the same period last year, primarily due to logistical challenges in getting product to Vancouver ports. The shortfall in our current quarter's international sales commitments were met through purchased potash. Potash cost of product sold was $191 per tonne this quarter, slightly higher than the $183 per tonne reported in the first quarter of 2013 due to a higher percentage of domestic sales which include freight. Gross margin on a per tonne basis was $107 in the first quarter of 2014, compared to the $221 per tonne realized during the same quarter in 2013.
Phosphate gross profit was $2-million in the first quarter of 2014, compared to $37-million in the same quarter last year. The decrease was due to lower realized sales prices, partially offset by higher sales volumes. Realized phosphate sales prices were $544 per tonne this quarter, a decrease from $698 per tonne in the same period last year. Lower prices were reflective of weak global market conditions experienced in the fourth quarter of 2013 and early in the first quarter of 2014. Phosphate cost of product sold was $536 per tonne in the first quarter of 2013, consistent with the same period last year but down from the fourth quarter of 2013. Phosphate sales volumes were 308,000 tonnes in the first quarter of 2014, up 76,000 tonnes compared to the same period last year. Gross margin in the first quarter of 2014 was $8 per tonne compared to $161 per tonne in the same period last year.
Gross profit from ammonium sulfate and other products was $19-million this quarter compared to $30-million in the same period last year. The decrease was due to lower realized sales prices resulting from competitive pressures. Product purchased for resale gross profit was $4-million in the first quarter of 2014, a $2-million reduction from the same period last year as a result of decreases in all major global nutrient prices, partially offset by higher domestic and international sales volumes.
Wholesale expenses in the first quarter of 2014 were $16-million lower than the same period last year. The decrease was primarily driven by a $24-million increase in gains on natural gas derivatives, resulting from the increase in benchmark natural gas prices. Partially offsetting the gains was lower earnings from associates and joint ventures in the first quarter due to lower prices and sales volumes at both our Egypt and Argentina nitrogen facilities.
Other
EBITDA for our Other non-operating business unit for the first quarter of 2014 was a loss of $68-million, compared to a loss of $62-million for the first quarter of 2013. The unfavorable change was primarily driven by a $15-million increase in share-based payments expense driven by an appreciation of our share price during the first quarter of 2014 and improved share performance relative to our peer group which resulted in an increase in fair value of all of our share-based incentive compensation plans. This unfavorable change was partially offset by a $12-million favorable change in gross profit for the first quarter of 2014 compared to the first quarter of 2013 which reflected more inventory held in our Retail business unit not yet sold to external customers that is at a lower margin than the prior year.
FINANCIAL CONDITION
The following are changes to working capital on our Consolidated Balance Sheets in the three-month period ended March 31, 2014 compared to December 31, 2013.
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(millions of
U.S. dollars,
except as March 31, December 31, $ % Explanation of the
noted) 2014 2013 Change Change change in balance
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Current assets
Cash and cash 592 801 (209) (26%) See discussion under
equivalents the section "Liquidity
and Capital
Resources".
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Accounts 2,143 2,105 38 2% Increased Wholesale
receivable trade receivables
consistent with the
start of the sales
season. This was
partially offset by
decreased Retail North
American trade
receivables and higher
collection of vendor
rebates in the first
quarter of 2014.
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Income taxes 106 78 28 36% First quarter tax
receivable installments paid
exceeded the first
quarter tax provision.
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Inventories 4,789 3,413 1,376 40% Seasonal Retail
inventory build-up in
preparation for the
spring season.
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Prepaid 379 805 (426) (53%) Drawdown of prepaid
expenses and inventory as Retail
deposits took delivery of
product in
anticipation of the
spring season.
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Other current 124 104 20 19% Increase in the amount
assets of investments.
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Assets held 230 202 28 14% Increased accounts
for sale receivable and
inventory consistent
with the start of the
sales season.
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Current
liabilities
Short-term 397 764 (367) (48%) Repayments of
debt commercial paper as
customer collections
were made in the first
quarter.
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Accounts 5,721 3,985 1,736 44% Retail inventory
payable purchases and customer
prepayments made in
anticipation of the
spring season.
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Income taxes 2 2 - 0% -
payable
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Current 54 58 (4) (7%) -
portion of
long-term
debt
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Current 115 112 3 3% -
portion of
other
provisions
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Liabilities 59 44 15 34% Increase in accounts
held for payable consistent
sale with the start of the
sales season.
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Working capital 2,015 2,543 (528) (21%)
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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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Three months ended March 31,
(millions of U.S. dollars) 2014 2013 Change
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Cash provided by operating activities 788 360 428
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Cash used in investing activities (510) (384) (126)
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Cash used in financing activities (467) (39) (428)
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Effect of exchange rate changes on cash and
cash equivalents (3) (7) 4
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Decrease in cash and cash equivalents from
continuing operations (192) (70) (122)
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Cash and cash equivalents used in discontinued
operations (17) (3) (14)
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The sources and uses of cash for the three months ended March 31, 2014 compared to the three months ended March 31, 2013 are summarized as follows:
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Cash provided by operating activities - Drivers behind the $428-million
source of cash increase
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Source of cash $219-million decrease in income taxes paid resulting
primarily from reduced earnings in 2013 and lower taxes
paid in the first quarter of 2014 compared to tax payments
made in the first quarter of 2013 on 2012 earnings.
$342-million increase in cash inflows from non-cash
working capital. This was primarily driven by less pre-
bought inventory in Retail as a result of lower purchase
prices which reduced the incentive to lock in inventory
coupled with a decrease in accounts receivable as a result
of lower Wholesale selling prices.
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Cash used in investing activities - Drivers behind the $126-million use of
cash increase
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Use of cash $122-million increase in capital expenditures primarily
related to the Vanscoy potash expansion project.
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Cash used in financing activities - Drivers behind the $428-million use of
cash increase
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Use of cash $414-million due to the repayment of $349-million short-
term debt as a result of customer collections early in the
first three months of 2014 compared to an issuance of $65-
million of short-term debt in the first three months of
2013.
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Capital Expenditures
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Three months ended
March 31,
(millions of U.S. dollars) 2014 2013
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Sustaining capital 114 96
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Investing capital 345 241
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Total 459 337
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Our investing capital expenditures increased in the first three months of 2014 compared to the first three months of 2013 due to increased activity on the Vanscoy potash expansion project.
Short-term Debt
Our short-term debt of $397-million at March 31, 2014 is summarized in note 6 of our Consolidated Financial Statements.
OUTSTANDING SHARE DATA
The number of Agrium's outstanding shares at April 30, 2014 was approximately 144 million. At April 30, 2014, the number of shares issuable pursuant to stock options outstanding (issuable assuming full exercise, where each option granted can be exercised for one common share) was approximately nil.
SELECTED QUARTERLY INFORMATION
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(millions of U.S.
dollars, 2014 2013 2013 2013 2013 2012 2012 2012
except per share
amounts) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
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Sales 3,079 2,867 2,796 6,908 3,156 3,093 2,768 6,669
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Gross profit 556 740 629 1,699 705 974 730 1,831
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Net earnings from
continuing
operations 12 110 80 744 146 358 140 859
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Net (loss) earnings
from discontinued
operations (9) (11) (4) 3 (5) (4) (11) 1
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Net earnings 3 99 76 747 141 354 129 860
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Earnings per share
from continuing
operations
attributable to
equity holders of
Agrium:
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Basic 0.08 0.74 0.54 5.00 0.98 2.37 0.87 5.44
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Diluted 0.08 0.74 0.54 5.00 0.98 2.36 0.87 5.43
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(Loss) earnings per
share from
discontinued
operations
attributable to
equity holders of
Agrium:
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Basic (0.06) (0.08) (0.02) 0.02 (0.04) (0.03) (0.07) -
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Diluted (0.06) (0.08) (0.02) 0.02 (0.04) (0.02) (0.07) 0.01
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Earnings per share
attributable to
equity holders of
Agrium:
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Basic 0.02 0.66 0.52 5.02 0.94 2.34 0.80 5.44
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Diluted 0.02 0.66 0.52 5.02 0.94 2.34 0.80 5.44
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The agricultural products business is seasonal in nature. Consequently, comparisons made on a year-over-year basis are more appropriate than quarter-over-quarter comparisons. Crop input sales are primarily concentrated in the spring and fall crop input application seasons, which are in the second quarter and fourth quarter. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete.
BUSINESS ACQUISITION
We completed the acquisition of certain Canadian and Australian agri-products assets of Viterra on October 1, 2013. During March 2014, we finalized our purchase price allocation without change to the fair values disclosed in our 2013 Annual Report. For further information, refer to note 3 of our Consolidated Financial Statements.
DISCONTINUED OPERATIONS
In December 2013, Agrium commenced with a divestment process for the AAT Direct Solutions and Turf and Ornamental businesses that were not transitioned to our Wholesale business unit. For further information, refer to note 2 of our Consolidated Financial Statements.
NORMAL COURSE ISSUER BID
On May 14, 2013, 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 7,472,587 common shares on the TSX and New York Stock Exchange during the period from May 21, 2013 to May 20, 2014 with a daily purchase limit of 133,301 common shares on the TSX. During the period from May 21, 2013 to December 31, 2013, we purchased approximately 5.8 million shares at an average share price of $86 for total consideration of approximately $498-million under our NCIB. There were no share repurchases during the three months ended March 31, 2014. Shareholders can obtain a copy of the NCIB notice submitted to the TSX without charge upon request.
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 measure mandated by IFRS. A non-IFRS financial measure generally either excludes or includes amounts that are not excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS. Refer to the following tables for further discussion of how they are calculated and their usefulness to users including management. Non-IFRS financial measures are not recognized measures under IFRS and our method of calculation may not 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 measures, their definitions and how management assesses each measure. As the measures set out below are presented in our Consolidated Financial Statements included in this MD&A, they are classified as additional IFRS financial measures where they reflect consolidated Agrium, and are classified as non-IFRS financial measures where they do not reflect consolidated Agrium, including references to EBITDA when presented on an operating segment basis.
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Additional IFRS
financial measures Definition Management's assessment
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EBIT Earnings (loss) from EBIT provides a supplemental
continuing measure used by management to: (1)
operations before evaluate the effectiveness of our
finance costs and businesses; (2) evaluate our
income taxes. ability to service debt; and (3)
determine resource allocations. We
believe EBIT is useful to
investors, securities analysts and
management, as the measure allows
for an evaluation of segment
performance exclusive of capital
structure and income taxes, both of
which are not a direct result of
the efficiency of each business and
are generally accounted for and
evaluated on a consolidated basis.
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The following table outlines our non-IFRS financial measures, their definitions and usefulness, and how management assesses each measure.
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Non-IFRS financial
measures Definition Management's assessment
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EBITDA Earnings (loss) from Refer to EBIT. This measure is also
continuing used by investors and securities
operations before analysts as a valuation metric and
finance costs, as an alternative to cash provided
income taxes, by operating activities.
depreciation and
amortization.
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Adjusted EBITDA EBITDA before Refer to EBIT and EBITDA.
finance costs, Management believes that this
income taxes, metric provides useful comparative
depreciation and information on our profitability by
amortization of adding back finance costs, income
joint ventures. taxes, depreciation and
amortization of joint ventures.
----------------------------------------------------------------------------
RECONCILIATIONS OF ADDITIONAL IFRS AND NON-IFRS FINANCIAL MEASURES
Adjusted EBITDA and EBITDA to EBIT
----------------------------------------------------------------------------
Three months ended
March 31, 2014
(millions of U.S. dollars) Retail Wholesale Other Consolidated
----------------------------------------------------------------------------
Adjusted EBITDA 17 237 (68) 186
----------------------------------------------------------------------------
Equity accounted
joint ventures:
Finance costs and income taxes - 4 - 4
----------------------------------------------------------------------------
Depreciation and amortization - 2 - 2
----------------------------------------------------------------------------
EBITDA 17 231 (68) 180
----------------------------------------------------------------------------
Depreciation and amortization 72 53 2 127
----------------------------------------------------------------------------
EBIT (55) 178 (70) 53
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA and EBITDA to
EBIT
----------------------------------------------------------------------------
Three months ended
March 31, 2013
(millions of U.S. dollars) Retail Wholesale Other Consolidated
----------------------------------------------------------------------------
Adjusted EBITDA 25 393 (62) 356
----------------------------------------------------------------------------
Equity accounted
joint ventures:
Finance costs and income taxes - 7 - 7
----------------------------------------------------------------------------
Depreciation and amortization - 2 - 2
----------------------------------------------------------------------------
EBITDA 25 384 (62) 347
----------------------------------------------------------------------------
Depreciation and amortization 53 50 5 108
----------------------------------------------------------------------------
EBIT (28) 334 (67) 239
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES
We prepare our financial statements in accordance with IFRS, which requires us to make assumptions and estimates about future events and apply significant judgments. We base our assumptions, estimates and judgments on our historical experience, current trends and all available information that we believe is relevant at the time we prepare the financial statements. However, future events and their effects cannot be determined with certainty. Accordingly, as confirming events occur, actual results could ultimately differ from our assumptions and estimates. Such differences could be material. For further information on the Company's critical accounting judgments and estimates, refer to the section "Critical Accounting Judgments and Estimates" of our 2013 annual Management's Discussion and Analysis, which is contained in our 2013 Annual Report. Since the date of our 2013 annual Management's Discussion and Analysis, there have not been any significant changes to our critical accounting judgments and estimates.
CHANGES IN ACCOUNTING POLICIES
The accounting policies applied in our Consolidated Financial Statements are the same as those applied in our audited annual financial statements in our 2013 Annual Report, with the exception of the adoption of IFRS 9 Financial Instruments and other accounting changes described in note 10 of our Consolidated Financial Statements.
For information regarding changes in accounting policies, refer to the section "Accounting Standards and Policy Changes Not Yet Implemented" of our 2013 annual Management's Discussion and Analysis, which is contained in our 2013 Annual Report.
BUSINESS RISKS
The information presented on Enterprise Risk Management and Key Business Risks on pages 74 - 77 in our 2013 Annual Report and under the heading "Risk Factors" on pages 29 - 40 in our 2013 Annual Information Form has not changed materially since December 31, 2013.
CONTROLS AND PROCEDURES
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2014 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 2013 Annual Information Form is filed with the Canadian securities regulatory authorities through SEDAR at www.sedar.com and with the U.S. securities regulatory authorities through EDGAR at www.sec.gov.
OUTLOOK, KEY RISKS AND UNCERTAINTIES
Major crop prices have strengthened from levels at the beginning of 2014, driven by strong demand and increased uncertainty over supply. The improvement in crop prices has led to a rebound in grower sentiment and has been supportive of crop input demand. Combined North American acreage of corn, soybean, cotton and canola is expected to be close to record highs in 2014, which is expected to be supportive of seed demand and for other crop inputs and agronomic services. Crop protection product demand, and associated service component, is expected to continue to be supported by growers' efforts to combat glyphosate resistant weeds with alternative chemistries. Glyphosate prices have been relatively steady so far in 2014 and are generally expected to remain firm.
The start of the spring planting season in North America is behind normal pace as a result of the coldest winter in 30 years throughout many areas of North America and prolonged cold and wet weather in early spring. The large North American crop in 2013, particularly in Canada, combined with the cold winter, have challenged rail and port transportation logistics so far in 2014. In some cases, the delayed start has allowed the crop nutrient supply chain more time for product to move to market. However, constrained logistical capacity is still expected to contribute to tight supply and demand balances within regional markets this season.
Following a strong start to 2014, global urea prices have declined since early February, driven by a seasonal slow-down in import demand and larger than usual supplies available from China. In North America, urea prices have declined from peak levels, but remain at a premium relative to import parity due to a tight supply and demand balance. U.S. offshore urea imports began the 2013/14 fertilizer year at a slow pace, but picked up as the spring season approached. Chinese urea exports will be a key driver of the nitrogen market in 2014. China exported the same volume of urea in the first two months of 2014 as it did in the first half of 2013. Another uncertainty in the nitrogen global market is the unrest between Russia and Ukraine, which could impact urea export availability from this region.
Pent up demand has provided support to global and North American potash markets so far in 2014. Data from the International Plant Nutrition Institute shows producer shipments in North America were up almost 50 percent in the first quarter of 2014 compared to 2013 levels. However, tight Canadian rail capacity, has constrained both domestic North American and export shipments. This has led to some regional tightness within North America and firm pricing. Globally, spot market prices have increased from early 2014 levels, driven by tighter potash export supply availability. Brazilian demand has been an important driver as Brazilian potash imports have begun 2014 at a similar pace to record 2013 levels. Furthermore, both China and India have signed supply agreements for 2014 which has provided the global marketplace with increased visibility.
Similar to the urea market, export phosphate prices have declined following a strong rally to begin 2014. Phosphate prices were supported by the combination of pent up demand and supply disruptions. Shipments of phosphate from Morocco were restricted in the first quarter of 2014 by adverse weather. Analysts expect Indian import demand to increase by approximately one million tonnes in 2014/15 as domestic Indian inventories of DAP are significantly below last year's levels. Global phosphate prices and the value of the Indian rupee will be important drivers of Indian DAP imports in the coming months. For most phosphate producers, sulfur and ammonia costs have increased to levels similar to where they were at this time a year ago which may lend some support to phosphate prices.
Forward-Looking Statements
Certain statements and other information included in this MD&A constitute "forward-looking information" within the meaning of applicable Canadian securities legislation or constitute "forward-looking statements" within the meaning of applicable U.S. securities legislation (collectively, the "forward-looking statements"). All statements in this MD&A other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to, statements as to management's expectations with respect to: future crop and crop input volumes, demand, margins, prices and sales; business and financial prospects; dividends and other plans, strategies, objectives and expectations, including with respect to future operations of Agrium and proposed acquisitions and divestitures and the growth and stability of our earnings. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements.
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below in this MD&A. Although Agrium believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The key assumptions that have been made in connection with the forward-looking statements include Agrium's ability to successfully integrate and realize the anticipated benefits of its already completed and future acquisitions.
Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general economic, market and business conditions, weather conditions including impacts from regional flooding and/or drought conditions; crop prices; the supply and demand and price levels for our major products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy, government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof, and political risks, including civil unrest, actions by armed groups or conflict, as well as counterparty and sovereign risk; and other risk factors detailed from time to time in Agrium reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States. There is a risk that the Egyptian Misr Fertilizer Production Company nitrogen facility in Egypt may not be allowed to proceed with the completion of the two new facilities. Additionally, there are risks associated with Agrium's acquisition of AWB, including litigation risk resulting from AWB having been named in litigation commenced by the Iraqi Government relating to the United Nations Oil-For-Food Programme. There are risks associated with our acquisition of certain Retail Agri-products assets of Viterra, including: timing and costs of the associated integration of the retained Viterra Retail Agri-products assets; the size and timing of expected synergies could be less favorable than anticipated; and other risk factors detailed from time to time in Agrium reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States. Furthermore, the potential divestiture of the Turf and Ornamental and Direct Solutions businesses and any potential financial gains or losses resulting from the completion of the strategic review process may differ materially from those in the forward-looking statements.
The purpose of our guidance for the second quarter of 2014 included herein 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 MD&A as a result of new information or future events, except as may be required under applicable U.S. federal securities laws or applicable Canadian securities legislation.
OTHER
Agrium Inc. is a major Retail supplier of agricultural products and services in North America, South America and Australia and a leading global Wholesale producer and marketer of all three major agricultural nutrients and the premier supplier of specialty fertilizers in North America. Agrium's strategy is to provide the crop inputs and services needed to feed a growing world. We focus on maximizing shareholder returns by driving continuous improvements to our base businesses, pursuing value-added growth opportunities across the crop input value chain and returning capital to shareholders.
A WEBSITE SIMULCAST of the 2014 1st Quarter Conference Call will be available in a listen-only mode beginning Wednesday, May 7th, 2014 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
March 31,
-------------------------------------------------------------------------
2014 2013(1)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales 3,079 3,156
-------------------------------------------------------------------------
Cost of product sold 2,523 2,451
-------------------------------------------------------------------------
Gross profit 556 705
-------------------------------------------------------------------------
Expenses
-------------------------------------------------------------------------
Selling 444 396
-------------------------------------------------------------------------
General and administrative 100 94
-------------------------------------------------------------------------
Earnings from associates and joint ventures (1) (13)
-------------------------------------------------------------------------
Other income (note 4) (40) (11)
-------------------------------------------------------------------------
Earnings before finance costs and income taxes 53 239
-------------------------------------------------------------------------
Finance costs related to long-term debt 19 22
-------------------------------------------------------------------------
Other finance costs 17 18
-------------------------------------------------------------------------
Earnings before income taxes 17 199
-------------------------------------------------------------------------
Income taxes 5 53
-------------------------------------------------------------------------
Net earnings from continuing operations 12 146
-------------------------------------------------------------------------
Net loss from discontinued operations (note 2) (9) (5)
-------------------------------------------------------------------------
Net earnings 3 141
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Attributable to:
-------------------------------------------------------------------------
Equity holders of Agrium 2 141
-------------------------------------------------------------------------
Non-controlling interest 1 -
-------------------------------------------------------------------------
Net earnings 3 141
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share attributable to equity
holders of Agrium (note 5)
-------------------------------------------------------------------------
Basic and diluted earnings per share from
continuing operations 0.08 0.98
-------------------------------------------------------------------------
Basic and diluted loss per share from
discontinued operations (0.06) (0.04)
-------------------------------------------------------------------------
Basic and diluted earnings per share 0.02 0.94
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Certain amounts have been reclassified as a result of discontinued
operations. See note 2, Discontinued Operations, Assets and Liabilities
Held for Sale.
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Comprehensive Income
(Millions of U.S. dollars)
(Unaudited)
Three months ended
March 31,
-------------------------------------------------------------------------
2014 2013
-------------------------------------------------------------------------
----------------------------------------------------------------
Net earnings 3 141
-------------------------------------------------------------------------
Other comprehensive loss
-------------------------------------------------------------------------
Items that are or may be reclassified to earnings
-------------------------------------------------------------------------
Share of comprehensive income of associates and
joint ventures 1 1
-------------------------------------------------------------------------
Foreign currency translation differences
-------------------------------------------------------------------------
Losses (106) (24)
-------------------------------------------------------------------------
Other comprehensive loss (105) (23)
-------------------------------------------------------------------------
Comprehensive (loss) income (102) 118
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Attributable to:
-------------------------------------------------------------------------
Equity holders of Agrium (103) 118
-------------------------------------------------------------------------
Non-controlling interest 1 -
--------------------
Comprehensive (loss) income (102) 118
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
(Unaudited)
Three months ended
March 31,
-------------------------------------------------------------------------
2014 2013(1)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating
-------------------------------------------------------------------------
Net earnings from continuing operations 12 146
-------------------------------------------------------------------------
Adjustments for
-------------------------------------------------------------------------
Depreciation and amortization 127 108
-------------------------------------------------------------------------
Earnings from associates and joint ventures (1) (13)
-------------------------------------------------------------------------
Share-based payments 31 16
-------------------------------------------------------------------------
Unrealized gain on derivative financial
instruments (14) (7)
-------------------------------------------------------------------------
Unrealized foreign exchange (gain) loss (2) 16
-------------------------------------------------------------------------
Interest income (11) (15)
-------------------------------------------------------------------------
Finance costs 36 40
-------------------------------------------------------------------------
Income taxes 5 53
-------------------------------------------------------------------------
Other 12 5
-------------------------------------------------------------------------
Interest received 12 15
-------------------------------------------------------------------------
Interest paid (32) (56)
-------------------------------------------------------------------------
Income taxes paid (36) (255)
-------------------------------------------------------------------------
Dividends from associates and joint ventures 1 1
-------------------------------------------------------------------------
Net changes in non-cash working capital 648 306
-------------------------------------------------------------------------
Cash provided by operating activities 788 360
-------------------------------------------------------------------------
Investing
-------------------------------------------------------------------------
Acquisitions, net of cash acquired (16) (34)
-------------------------------------------------------------------------
Capital expenditures (459) (337)
-------------------------------------------------------------------------
Capitalized borrowing costs (23) (9)
-------------------------------------------------------------------------
Purchase of investments (26) (8)
-------------------------------------------------------------------------
Proceeds from disposal of investments 12 -
-------------------------------------------------------------------------
Other (22) (10)
-------------------------------------------------------------------------
Net changes in non-cash working capital 24 14
-------------------------------------------------------------------------
Cash used in investing activities (510) (384)
-------------------------------------------------------------------------
Financing
-------------------------------------------------------------------------
Short-term debt (349) 65
-------------------------------------------------------------------------
Long-term debt issued - 10
-------------------------------------------------------------------------
Repayment of long-term debt (10) (41)
-------------------------------------------------------------------------
Dividends paid (108) (75)
-------------------------------------------------------------------------
Shares issued - 2
-------------------------------------------------------------------------
Cash used in financing activities (467) (39)
-------------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents (3) (7)
-------------------------------------------------------------------------
Decrease in cash and cash equivalents from
continuing operations (192) (70)
-------------------------------------------------------------------------
Cash and cash equivalents used in discontinued
operations (note 2) (17) (3)
-------------------------------------------------------------------------
Cash and cash equivalents - beginning of period 801 658
-------------------------------------------------------------------------
Cash and cash equivalents - end of period 592 585
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Certain amounts have been reclassified as a result of discontinued
operations. See note 2, Discontinued Operations, Assets and Liabilities
Held for Sale.
See accompanying notes.
AGRIUM INC.
Consolidated Balance Sheets
(Millions of U.S. dollars)
(Unaudited)
December
March 31, 31,
-------------------------------------------------------------- ------------
2014 2013 2013
-------------------------------------------------------------- -----------
Assets
-------------------------------------------------------------- -----------
Current assets
-------------------------------------------------------------- -----------
Cash and cash equivalents 592 585 801
-------------------------------------------------------------- -----------
Accounts receivable 2,143 2,395 2,105
-------------------------------------------------------------- -----------
Income taxes receivable 106 103 78
-------------------------------------------------------------- -----------
Inventories 4,789 4,604 3,413
-------------------------------------------------------------- -----------
Advance on acquisition of Viterra
Inc. (note 3) - 1,774 -
-------------------------------------------------------------- -----------
Prepaid expenses and deposits 379 544 805
-------------------------------------------------------------- -----------
Other current assets 124 - 104
-------------------------------------------------------------- -----------
Assets held for sale (note 2) 230 - 202
-------------------------------------------------------------- -----------
8,363 10,005 7,508
-------------------------------------------------------------- -----------
Property, plant and equipment (note
8) 5,193 3,705 4,960
-------------------------------------------------------------- -----------
Intangibles 724 616 738
-------------------------------------------------------------- -----------
Goodwill 1,970 2,356 1,958
-------------------------------------------------------------- -----------
Investments in associates and joint
ventures 639 645 639
-------------------------------------------------------------- -----------
Other assets 114 113 99
-------------------------------------------------------------- -----------
Deferred income tax assets 78 89 75
-------------------------------------------------------------- -----------
17,081 17,529 15,977
-------------------------------------------------------------- -----------
-------------------------------------------------------------- -----------
Liabilities and shareholders' equity
-------------------------------------------------------------- -----------
Current liabilities
-------------------------------------------------------------- -----------
Short-term debt (note 6) 397 1,370 764
-------------------------------------------------------------- -----------
Accounts payable 5,721 5,259 3,985
-------------------------------------------------------------- -----------
Income taxes payable 2 - 2
-------------------------------------------------------------- -----------
Current portion of long-term debt 54 478 58
-------------------------------------------------------------- -----------
Current portion of other provisions 115 103 112
-------------------------------------------------------------- -----------
Liabilities held for sale (note 2) 59 - 44
-------------------------------------------------------------- -----------
6,348 7,210 4,965
-------------------------------------------------------------- -----------
Long-term debt 3,058 2,078 3,066
-------------------------------------------------------------- -----------
Post-employment benefits 131 185 135
-------------------------------------------------------------- -----------
Other provisions 410 422 426
-------------------------------------------------------------- -----------
Other liabilities 35 78 59
-------------------------------------------------------------- -----------
Deferred income tax liabilities 514 594 530
-------------------------------------------------------------- -----------
10,496 10,567 9,181
-------------------------------------------------------------- -----------
Shareholders' equity
-------------------------------------------------------------- -----------
Share capital 1,820 1,892 1,820
-------------------------------------------------------------- -----------
Retained earnings 5,139 5,019 5,253
-------------------------------------------------------------- -----------
Accumulated other comprehensive
(loss) income (376) 48 (279)
-------------------------------------------------------------- -----------
Equity holders of Agrium 6,583 6,959 6,794
-------------------------------------------------------------- -----------
Non-controlling interest 2 3 2
-------------------------------------------------------------- -----------
6,585 6,962 6,796
-------------------------------------------------------------- -----------
17,081 17,529 15,977
-------------------------------------------------------------- -----------
-------------------------------------------------------------- -----------
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Shareholders' Equity
(Millions of U.S. dollars, except share data)
(Unaudited)
Millions
of
common Share Retained
shares capital earnings
---------------------------------------------------------------------------
December 31, 2012 149 1,890 4,955
---------------------------------------------------------------------------
Net earnings - - 141
---------------------------------------------------------------------------
Other comprehensive
income (loss), net of
tax
---------------------------------------------------------------------------
Other - - -
---------------------------------------------------------------------------
Comprehensive income
(loss), net of tax - - 141
---------------------------------------------------------------------------
Dividends - - (75)
---------------------------------------------------------------------------
Non-controlling interest
transactions - - (2)
---------------------------------------------------------------------------
Share-based payment
transactions - 2 -
---------------------------------------------------------------------------
March 31, 2013 149 1,892 5,019
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
December 31, 2013 144 1,820 5,253
---------------------------------------------------------------------------
Net earnings - - 2
---------------------------------------------------------------------------
Other comprehensive
income (loss), net of
tax
---------------------------------------------------------------------------
Other - - -
---------------------------------------------------------------------------
Comprehensive income
(loss), net of tax - - 2
---------------------------------------------------------------------------
Dividends - - (108)
---------------------------------------------------------------------------
Non-controlling interest
transactions - - -
---------------------------------------------------------------------------
Impact of adopting IFRS 9
at January 1, 2014 - - (8)
---------------------------------------------------------------------------
March 31, 2014 144 1,820 5,139
---------------------------------------------------------------------------
---------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Shareholders' Equity
(Millions of U.S. dollars, except share data)
(Unaudited)
Other comprehensive income
-------------------------------------------------
Comprehensive
Available loss of
for associates
sale Foreign and
financial currency joint
instruments translation ventures Total
---------------------------------------------------------------------------
December 31, 2012 - 74 (3) 71
---------------------------------------------------------------------------
Net earnings - - - -
---------------------------------------------------------------------------
Other comprehensive
income (loss), net of
tax
---------------------------------------------------------------------------
Other - (24) 1 (23)
---------------------------------------------------------------------------
Comprehensive income
(loss), net of tax - (24) 1 (23)
---------------------------------------------------------------------------
Dividends - - - -
---------------------------------------------------------------------------
Non-controlling interest
transactions - - - -
---------------------------------------------------------------------------
Share-based payment
transactions - - - -
---------------------------------------------------------------------------
March 31, 2013 - 50 (2) 48
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
December 31, 2013 (8) (264) (7) (279)
---------------------------------------------------------------------------
Net earnings - - - -
---------------------------------------------------------------------------
Other comprehensive
income (loss), net of
tax
---------------------------------------------------------------------------
Other - (106) 1 (105)
---------------------------------------------------------------------------
Comprehensive income
(loss), net of tax - (106) 1 (105)
---------------------------------------------------------------------------
Dividends - - - -
---------------------------------------------------------------------------
Non-controlling interest
transactions - - - -
---------------------------------------------------------------------------
Impact of adopting IFRS 9
at January 1, 2014 8 - - 8
---------------------------------------------------------------------------
March 31, 2014 - (370) (6) (376)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Consolidated Statements of Shareholders' Equity
(Millions of U.S. dollars, except share data)
(Unaudited)
Equity
holders Non-
of controlling Total
Agrium interest equity
---------------------------------------------------------------------------
December 31, 2012 6,916 4 6,920
---------------------------------------------------------------------------
Net earnings 141 - 141
---------------------------------------------------------------------------
Other comprehensive
income (loss), net of
tax
---------------------------------------------------------------------------
Other (23) - (23)
---------------------------------------------------------------------------
Comprehensive income
(loss), net of tax 118 - 118
---------------------------------------------------------------------------
Dividends (75) - (75)
---------------------------------------------------------------------------
Non-controlling interest
transactions (2) (1) (3)
---------------------------------------------------------------------------
Share-based payment
transactions 2 - 2
---------------------------------------------------------------------------
March 31, 2013 6,959 3 6,962
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
December 31, 2013 6,794 2 6,796
---------------------------------------------------------------------------
Net earnings 2 1 3
---------------------------------------------------------------------------
Other comprehensive
income (loss), net of
tax
---------------------------------------------------------------------------
Other (105) - (105)
---------------------------------------------------------------------------
Comprehensive income
(loss), net of tax (103) 1 (102)
---------------------------------------------------------------------------
Dividends (108) - (108)
---------------------------------------------------------------------------
Non-controlling interest
transactions - (1) (1)
---------------------------------------------------------------------------
Impact of adopting IFRS 9
at January 1, 2014 - - -
---------------------------------------------------------------------------
March 31, 2014 6,583 2 6,585
---------------------------------------------------------------------------
---------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Summarized Notes to the Consolidated Financial Statements
For the three months ended March 31, 2014
(Millions of U.S. dollars, except per share amounts)
(Unaudited)
1. Corporate Information
Corporate information
Agrium Inc. ("Agrium") is incorporated under the laws of Canada with common shares listed under the symbol "AGU" on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX). 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 core strategic business units:
-- Retail: Distributes crop nutrients, crop protection products, seed 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, and produces,
markets and distributes crop nutrients and industrial products through
the following businesses:
-- Nitrogen: Manufacturing in Alberta, Texas and Argentina, and
production of ESNr, (Environmentally Smart Nitrogen) polymer-coated
nitrogen crop nutrients;
-- Potash: Mining and processing in Saskatchewan;
-- Phosphate: Owning and operating mines and production facilities in
Alberta and Idaho;
-- Product purchased for resale: Marketing nutrient products from other
suppliers in North and South America and Europe; and
-- Ammonium sulfate and other: Producing blended crop nutrients and
micronutrients.
Additional information on our operating segments is included in note 9.
Basis of preparation and statement of compliance
These consolidated interim financial statements ("interim financial statements") were approved for issuance by the Audit Committee on May 6, 2014. 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 2013 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 2013 Annual Report, with the exception of the adoption of IFRS 9 Financial Instruments and other accounting changes described in note 10.
Seasonality in our business results from increased demand for our products during planting seasons. Sales are generally higher in spring and fall.
2. Discontinued Operations, Assets and Liabilities Held for Sale
Three months ended
Condensed information of discontinued operations March 31,
--------------------------------------------------------------------------
2014 2013
--------------------------------------------------------------------------
Operating information
--------------------------------------------------------------------------
Discontinued operations of assets held for sale
--------------------------------------------------------------------------
Sales 60 68
--------------------------------------------------------------------------
Expenses 71 75
--------------------------------------------------------------------------
Loss before income taxes (11) (7)
--------------------------------------------------------------------------
Income tax recovery (2) (2)
--------------------------------------------------------------------------
Net loss from discontinued operations (9) (5)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cash used in operating activities (17) (3)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Balance sheet information March 31,
------------------------------------------------------------
2014
------------------------------------------------------------
Accounts receivable 81
------------------------------------------------------------
Inventories 94
------------------------------------------------------------
Property, plant and equipment 26
------------------------------------------------------------
Intangibles 27
------------------------------------------------------------
Deferred income tax assets 2
------------------------------------------------------------
Assets held for sale 230
------------------------------------------------------------
------------------------------------------------------------
Accounts payable 58
------------------------------------------------------------
Income taxes payable 1
------------------------------------------------------------
Liabilities held for sale 59
------------------------------------------------------------
------------------------------------------------------------
3. Business Acquisition
Viterra Inc.
We completed the acquisition of 100 percent of certain Canadian and Australian agri-products assets of Viterra Inc. on October 1, 2013. We engaged independent valuation experts to assist us in determining the fair value of the assets acquired and liabilities assumed. During March 2014, we finalized our purchase price allocation without change to the fair values disclosed in our 2013 Annual Report.
4. Other Expenses
Three months ended
Other expenses March 31,
--------------------------------------------------------------------------
2014 2013
--------------------------------------------------------------------------
Realized gain on derivative financial
instruments (33) (14)
--------------------------------------------------------------------------
Unrealized gain on derivative financial
instruments (14) (7)
--------------------------------------------------------------------------
Foreign exchange loss 12 19
--------------------------------------------------------------------------
Interest income (11) (15)
--------------------------------------------------------------------------
Environmental remediation and asset retirement
obligations (2) 1
--------------------------------------------------------------------------
Bad debt expense 5 5
--------------------------------------------------------------------------
Potash profit and capital tax 3 4
--------------------------------------------------------------------------
Other - (4)
--------------------------------------------------------------------------
(40) (11)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
5. Earnings per Share
Three months ended
Attributable to equity holders of Agrium March 31,
--------------------------------------------------------------------------
2014 2013
--------------------------------------------------------------------------
Numerator
--------------------------------------------------------------------------
Net earnings from continuing operations 11 146
--------------------------------------------------------------------------
Net loss from discontinued operations (9) (5)
--------------------------------------------------------------------------
Net earnings 2 141
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Denominator (millions)
--------------------------------------------------------------------------
Weighted average number of shares outstanding
for basic and diluted earnings per share 144 149
--------------------------------------------------------------------------
--------------------------------------------------------------------------
6. Debt
March 31, December 31,
-------------------------------------------------------------- ------------
2014 2013
-------------------------------------------------------------- ------------
Maturity Rate
-------------------------------------------------------------- ------------
Short-term debt
-------------------------------------------------------------- ------------
Commercial paper 2014 0.29 150 503
-------------------------------------------------------------- ------------
Credit facilities 2.02 247 261
-------------------------------------------------------------- ------------
397 764
-------------------------------------------------------------- ------------
-------------------------------------------------------------- ------------
In April 2014, we filed a Base Shelf Prospectus permitting the issuance of up to $2.5-billion of common shares, debt and other securities until May 2016. Issuance of securities requires us to file a prospectus supplement and is subject to availability of funding in capital markets.
7. Financial Instruments
Natural gas derivatives outstanding March 31,
--------------------------------------------------------------------------
2014
--------------------------------------------------------------------------
Fair value
of assets
Notional Maturities (liabilities)
---------------------------------------------------------------------------
AECO Swaps (BCF) 60 2014-2018 15
---------------------------------------------------------------------------
15
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Gross Carrying
Balance sheet presentation amount Netting amount
---------------------------------------------------------------------------
Accounts receivable 36 (33) 3
---------------------------------------------------------------------------
Other assets 189 (177) 12
---------------------------------------------------------------------------
Accounts payable (33) 33 -
---------------------------------------------------------------------------
Other liabilities (177) 177 -
---------------------------------------------------------------------------
15 - 15
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Natural gas derivatives outstanding December 31,
---------------------------------------------------------------------------
2013
---------------------------------------------------------------------------
Fair value
of assets
Notional Maturities (liabilities)
---------------------------------------------------------------------------
AECO Swaps (BCF) 8 2014 -
---------------------------------------------------------------------------
-
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Gross Carrying
Balance sheet presentation amount Netting amount
---------------------------------------------------------------------------
Accounts receivable 26 (26) -
---------------------------------------------------------------------------
Other assets - - -
---------------------------------------------------------------------------
Accounts payable (26) 26 -
---------------------------------------------------------------------------
Other liabilities - - -
---------------------------------------------------------------------------
- - -
---------------------------------------------------------------------------
---------------------------------------------------------------------------
March 31,
---------------------------
2014
---------------------------
Classification of financial instruments Carrying
measured at fair value Fair value value
------------------
Level 1 Level 2
---------------------------------------------------------------------------
Accounts receivable - derivatives 6 - 6
---------------------------------------------------------------------------
Other current financial assets - marketable
securities 21 86 107
---------------------------------------------------------------------------
Other financial assets - derivatives 12 - 12
---------------------------------------------------------------------------
Accounts payable - derivatives 5 - 5
---------------------------------------------------------------------------
Classification of fair value of long-term debt
---------------------------------------------------------------------------
Debentures - 3,269 2,990
---------------------------------------------------------------------------
---------------------------------------------------------------------------
December 31,
---------------------------
2013
---------------------------
Classification of financial instruments Carrying
measured at fair value Fair value value
------------------
Level 1 Level 2
---------------------------------------------------------------------------
Cash and cash equivalents - 801 801
---------------------------------------------------------------------------
Accounts receivable - derivatives 1 - 1
---------------------------------------------------------------------------
Other current financial assets
---------------------------------------------------------------------------
Available for sale - equities 14 - 14
---------------------------------------------------------------------------
Available for sale - fixed income - 90 90
---------------------------------------------------------------------------
Other financial assets
---------------------------------------------------------------------------
Available for sale 12 - 12
---------------------------------------------------------------------------
Accounts payable - derivatives - 2 2
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Classification of fair value of long-term debt
---------------------------------------------------------------------------
Debentures - 3,124 2,989
---------------------------------------------------------------------------
---------------------------------------------------------------------------
There have been no transfers between Level 1 and Level 2 fair value measurements in the three months ended March 31, 2014 or March 31, 2013. We do not measure any of our financial instruments using Level 3 inputs.
8. Additional Information
Property, plant and equipment
During the three months ended March 31, 2014, we added $290-million to assets under construction at our Vanscoy Potash facility.
Dividends
March 31,
---------------------------------------------------------------------------
2014
Paid to
Declared Shareholders Total
-----------------------------------------------
Effective Per share Total
---------------------------------------------------------------------------
December 12, 2013 0.75 108 January 16, 2014 108
---------------------------------------------------------------------------
February 21, 2014 0.75 108 April 17, 2014 NA
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Share capital
During the three months ended March 31, 2014, we granted share-based compensation awards to officers and employees consisting of 418,482 Tandem Stock Appreciation Rights with a grant price of $90.53 and 215,073 Performance Share Units.
Our authorized share capital consists of unlimited common shares without par value and unlimited preferred shares.
9. Operating Segments
Three months ended
March 31,
--------------------------------------------------------------------------
Segment operations 2014 2013
--------------------------------------------------------------------------
Sales
--------------------------------------------------------------------------
Retail
--------------------------------------------------------------------------
North America 1,721 1,590
--------------------------------------------------------------------------
International 511 549
--------------------------------------------------------------------------
Total Retail 2,232 2,139
--------------------------------------------------------------------------
Wholesale
--------------------------------------------------------------------------
Nitrogen 383 434
--------------------------------------------------------------------------
Potash 128 152
--------------------------------------------------------------------------
Phosphate 167 162
--------------------------------------------------------------------------
Product purchased for resale 294 352
--------------------------------------------------------------------------
Ammonium sulfate and other 89 92
--------------------------------------------------------------------------
Total Wholesale 1,061 1,192
--------------------------------------------------------------------------
Other (214) (175)
--------------------------------------------------------------------------
3,079 3,156
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Inter-segment sales
--------------------------------------------------------------------------
Retail 5 4
--------------------------------------------------------------------------
Wholesale 209 171
--------------------------------------------------------------------------
214 175
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Earnings before income taxes
--------------------------------------------------------------------------
Retail
--------------------------------------------------------------------------
North America (82) (23)
--------------------------------------------------------------------------
International 27 (5)
--------------------------------------------------------------------------
Total Retail (55) (28)
--------------------------------------------------------------------------
Wholesale
--------------------------------------------------------------------------
Nitrogen 100 186
--------------------------------------------------------------------------
Potash 46 84
--------------------------------------------------------------------------
Phosphate 2 37
--------------------------------------------------------------------------
Product purchased for resale 4 6
--------------------------------------------------------------------------
Ammonium sulfate and other 19 30
--------------------------------------------------------------------------
171 343
--------------------------------------------------------------------------
Unallocated expenses (7) 9
--------------------------------------------------------------------------
Total Wholesale 178 334
--------------------------------------------------------------------------
Other (70) (67)
--------------------------------------------------------------------------
Earnings before finance costs and income taxes 53 239
--------------------------------------------------------------------------
Finance costs related to long-term debt 19 22
--------------------------------------------------------------------------
Other finance costs 17 18
--------------------------------------------------------------------------
Earnings before income taxes 17 199
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Three months ended
March 31,
---------------------------------------------------------------------------
2014 2013
---------------------------------------------------------------------------
Retail sales
---------------------------------------------------------------------------
Crop nutrients 896 802
---------------------------------------------------------------------------
Crop protection products 730 786
---------------------------------------------------------------------------
Seed 298 285
---------------------------------------------------------------------------
Merchandise 186 120
---------------------------------------------------------------------------
Services and other 122 146
---------------------------------------------------------------------------
2,232 2,139
---------------------------------------------------------------------------
---------------------------------------------------------------------------
During the three months ended March 31, 2014, reports reviewed on a regular basis by our senior leadership team ceased to include the separate results of ESN and Micronutrients, which we have reported in the preceding tables with the results of our Nitrogen and Ammonium Sulfate and Other segments. We have revised comparative figures to reflect the new classification.
10. Significant Accounting Policies
Except as described below, the accounting policies applied in these interim financial statements are the same as those applied by Agrium in our 2013 Annual Report.
Description Agrium's date and Impact
New or Standard/ method of adoption
amended interpretati
on
---------------------------------------------------------------------------
New IFRS 9 Financial Adopted all of the As described
Instruments (as requirements of below
amended in IFRS 9 on January
November 2013) 1, 2014,
replaces previous retrospectively
guidance on the without
classification and restatement of
measurement of prior periods
non-derivative
financial assets.
IFRS 9 also adds
guidance replacing
previous hedge
accounting
requirements to
more closely align
the accounting
with risk
management
activities.
---------------------------------------------------------------------------
Amended IAS 32 Offsetting Adopted January 1, No material
Financial Assets 2014, impact
and Liabilities retrospectively
clarifies
requirements for
the rights of set-
off and provisions
on net settlement.
---------------------------------------------------------------------------
New IFRIC 21 Levies establishes Adopted January 1, No material
guidance on 2014, impact
accounting for retrospectively
levies imposed by
governments.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Impact of Adoption of IFRS 9 (2013)
On adoption of IFRS 9, in accordance with its transitional provisions, we have not restated prior periods but have classified the financial assets that we held at January 1, 2014 retrospectively based on the new classification requirements and the characteristics of each financial instrument at the transition date. Adoption of IFRS 9 resulted in balance sheet reclassifications without impact to earnings.
Accounting policy changes adopted under IFRS 9 Financial Instruments
We recognize a financial asset or a financial liability when we become a party to the contractual provisions of the instrument. We classify and measure financial assets on initial recognition as described below.
Classification of financial instruments
---------------------------------------------------------------------------
Characteristics of financial assets Category on initial
recognition
---------------------------------------------------------------------------
If the objective of our business model for a debt Amortized cost
investment is to:
- Hold the asset to collect the contractual cash
flows; and
- The contractual terms give rise on specified
dates to cash flows that are solely payments of
principal and interest.
---------------------------------------------------------------------------
All financial instruments not at amortized cost Fair value
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Recognition and measurement of financial instruments
---------------------------------------------------------------------------
Fair value through Fair value through Financial assets
profit or loss other and liabilities at
("FVTPL") comprehensive amortized cost
income ("FVTOCI") ("AC")
---------------------------------------------------------------------------
Instrument type Debt, equity or Equity Debt
derivative
---------------------------------------------------------------------------
Measurement Fair value Fair value Amortized cost
---------------------------------------------------------------------------
Fair value Profit or loss Other -
gains (losses) comprehensive
income (1)(2)
---------------------------------------------------------------------------
Interest and Profit or loss Profit or loss Profit or loss:
dividends effective interest
rate
---------------------------------------------------------------------------
Impairment Profit or loss Other Profit or loss
(assets) comprehensive (assets)
income (2)
---------------------------------------------------------------------------
Foreign Profit or loss Other Profit or loss
exchange comprehensive
income (2)
---------------------------------------------------------------------------
Transaction Profit or loss Included in cost Included in cost
costs of instrument of instrument
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) For equity investments not held for trading, we may make an irrevocable
election at initial recognition to recognize changes in fair value
through other comprehensive income rather than profit or loss. We did
not make any such elections.
(2) If we elect to present unrealized and realized fair value gains and
losses on equity investments in other comprehensive income, there is no
subsequent recycling of fair value gains and losses to profit or loss.
We would recognize dividends from such investments in profit or loss as
long as they represent a return on investment.
(3) We may make an election under certain circumstances to irrevocably
designate a financial asset or financial liability as measured at fair
value. We did not make any such elections.
For financial liabilities, IFRS 9 retains most of the IAS 39 requirements. Because we do not have any financial liabilities designated at fair value through profit or loss or embedded derivatives, the adoption of IFRS 9 did not impact our accounting policies for financial liabilities or derivative financial instruments. We do not currently carry any derivative investments that we have designated as hedging instruments.
We recognize purchases and sales of financial assets on the trade date, which is the date on which we commit to purchase or sell the asset. We derecognize financial assets when the rights to receive cash flows from the investments have expired or we have transferred them, and we have transferred substantially all risks and rewards of ownership. We recognize derivative contracts with physical delivery that meet certain conditions on the settlement date.
Classification of financial
instruments
Financial instrument Category under IAS Category under
39 IFRS 9
---------------------------------------------------------------------------
Financial assets
---------------------------------------------------------------------------
Cash and cash equivalents (1) FVTPL AC
---------------------------------------------------------------------------
Accounts receivable - trade (1) L&R AC
---------------------------------------------------------------------------
Accounts receivable - derivatives FVTPL FVTPL
---------------------------------------------------------------------------
Advance on acquisition of Viterra L&R -
Inc. (1)
---------------------------------------------------------------------------
Other financial assets - marketable AFS FVTPL
securities (2)
---------------------------------------------------------------------------
Other financial assets - L&R AC
receivables
---------------------------------------------------------------------------
Other financial assets - AFS AC
investments (3)
---------------------------------------------------------------------------
Other financial assets - FVTPL FVTPL
derivatives
---------------------------------------------------------------------------
Financial liabilities
---------------------------------------------------------------------------
Short-term debt (1) AC AC
---------------------------------------------------------------------------
Accounts payable - trade (1) AC AC
---------------------------------------------------------------------------
Accounts payable - derivatives FVTPL FVTPL
---------------------------------------------------------------------------
Long-term debt AC AC
---------------------------------------------------------------------------
Other financial liabilities AC AC
---------------------------------------------------------------------------
Other financial liabilities - FVTPL FVTPL
derivatives
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Carrying value approximates fair value due to the short-term nature of
the instruments.
(2) We reclassified marketable securities of $104-million classified as
current assets available for sale at January 1, 2014 to fair value
through profit or loss ($95-million) and amortized cost ($9-million)
without any fair value gain or loss on reclassification. We transferred
net accumulated fair value losses of $8-million on these securities
classified as available for sale at January 1, 2014 to retained
earnings.
(3) We reclassified investments of $12-million classified as non-current
assets available for sale at January 1, 2014 to amortized cost without
any gain or loss on reclassification.
AGRIUM INC.
Supplemental Information 1
Results by Business Unit
(Millions of U.S. dollars)
(Unaudited)
Three months ended March 31,
--------------------------------------------------------------------------
2014
--------------------------------------------------------------------------
Retail Wholesale Other Total
--------------------------------------------------------------------------
Sales - external 2,227 852 - 3,079
- inter-segment 5 209 (214) -
--------------------------------------------------------------------------
Total sales 2,232 1,061 (214) 3,079
Cost of product sold 1,845 890 (212) 2,523
--------------------------------------------------------------------------
Gross profit 387 171 (2) 556
--------------------------------------------------------------------------
Gross profit (%) 17 16 18
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Selling 436 11 (3) 444
General and
administrative 28 10 62 100
Earnings from associates
and joint ventures (1) - - (1)
Other (income) expenses (21) (28) 9 (40)
--------------------------------------------------------------------------
EBIT (1) (55) 178 (70) 53
EBITDA (2) 17 231 (68) 180
Adjusted EBITDA (2) 17 237 (68) 186
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Three months ended March 31,
--------------------------------------------------------------------------
2013
--------------------------------------------------------------------------
Wholesale
Retail (3) Other (4) Total (4)
--------------------------------------------------------------------------
Sales - external 2,135 1,021 - 3,156
- inter-segment 4 171 (175) -
--------------------------------------------------------------------------
Total sales 2,139 1,192 (175) 3,156
Cost of product sold 1,763 849 (161) 2,451
--------------------------------------------------------------------------
Gross profit 376 343 (14) 705
--------------------------------------------------------------------------
Gross profit (%) 18 29 22
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Selling 389 11 (4) 396
General and
administrative 25 20 49 94
(Earnings) loss from
associates and joint
ventures (1) (13) 1 (13)
Other (income) expenses (9) (9) 7 (11)
--------------------------------------------------------------------------
EBIT (1) (28) 334 (67) 239
EBITDA (2) 25 384 (62) 347
Adjusted EBITDA (2) 25 393 (62) 356
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Earnings (loss) from continuing operations before finance costs and
income taxes.
(2) Certain measures presented in this table are not recognized measures
under IFRS. Refer to Supplemental Information 6.
(3) Restated for the results of ESN and Micronutrients businesses that have
transitioned to our Wholesale business unit.
(4) Restated for reclassifications resulting from discontinued operations.
AGRIUM INC.
Supplemental Information 2
Product Lines
(Millions of U.S. dollars)
(Unaudited)
Three months ended March 31,
--------------------------------------------------------------------------
2014
-------------------------------------------------------------------------
Cost of
product Gross
Sales sold (1) profit
-------------------------------------------------------------------------
Retail (2)
Crop nutrients 896 768 128
Crop protection products 730 625 105
Seed 298 252 46
Merchandise 186 162 24
Services and other 122 38 84
-------------------------------------------------------------------------
2,232 1,845 387
-------------------------------------------------------------------------
Wholesale (3)
Nitrogen 383 283 100
Potash 128 82 46
Phosphate 167 165 2
Product purchased for resale 294 290 4
Ammonium sulfate and other 89 70 19
-------------------------------------------------------------------------
1,061 890 171
-------------------------------------------------------------------------
Other inter-segment eliminations (4) (214) (212) (2)
-------------------------------------------------------------------------
Total (4) 3,079 2,523 556
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Wholesale equity accounted joint venture
results:
Nitrogen - international 27 18 9
Product purchased for resale 21 20 1
-------------------------------------------------------------------------
48 38 10
-------------------------------------------------------------------------
Total Wholesale including equity accounted
joint ventures (3) 1,109 928 181
-------------------------------------------------------------------------
-------------------------------------------------------------------------
AGRIUM INC.
Supplemental Information 2
Product Lines
(Millions of U.S. dollars)
(Unaudited)
Three months ended March 31,
-------------------------------------------------------------------------
2013
-------------------------------------------------------------------------
Cost of
product Gross
Sales sold (1) profit
-------------------------------------------------------------------------
Retail (2)
Crop nutrients 802 681 121
Crop protection products 786 658 128
Seed 285 241 44
Merchandise 120 98 22
Services and other 146 85 61
-------------------------------------------------------------------------
2,139 1,763 376
-------------------------------------------------------------------------
Wholesale (3)
Nitrogen 434 248 186
Potash 152 68 84
Phosphate 162 125 37
Product purchased for resale 352 346 6
Ammonium sulfate and other 92 62 30
-------------------------------------------------------------------------
1,192 849 343
-------------------------------------------------------------------------
Other inter-segment eliminations (4) (175) (161) (14)
-------------------------------------------------------------------------
Total (4) 3,156 2,451 705
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Wholesale equity accounted joint venture
results:
Nitrogen - international 39 24 15
Product purchased for resale 31 30 1
-------------------------------------------------------------------------
70 54 16
-------------------------------------------------------------------------
Total Wholesale including equity accounted
joint ventures (3) 1,262 903 359
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Includes depreciation and amortization.
(2) International Retail sales were $511-million (2013 - $549-million) and
gross profit was $104-million (2013 - $97-million) for the three months
ended March 31.
(3) Restated for the results of ESN and Micronutrients businesses that have
transitioned to our Wholesale business unit.
(4) Restated for reclassifications resulting from discontinued operations.
AGRIUM INC.
Supplemental Information 3
Selected Volumes and Sales Prices
(Unaudited)
Three months ended March 31,
---------------------------------------------------------------------------
2014
--------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's)($/tonne)($/tonne)($/tonne)
--------------------------------------------------------------------------
Retail
Crop nutrients
North America 1,400 502
International 426 453
-----------------------------------
Total crop nutrients 1,826 491 421 70
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Wholesale (1)
Nitrogen
North America
Ammonia 179 498
Urea 382 441
ESN 84 569
Other 231 339
--------------------------------------------------------------------------
Total nitrogen 876 438 324 114
--------------------------------------------------------------------------
Potash
North America 292 342
International 136 204
--------------------------------------------------------------------------
Total potash 428 298 191 107
--------------------------------------------------------------------------
Phosphate 308 544 536 8
Product purchased for resale 805 365 360 5
Ammonium sulfate 92 306 172 134
Other 127
--------------------------------------------------------------------------
Total Wholesale 2,636 403 338 65
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Wholesale equity accounted joint
ventures:
Nitrogen - international 62 433 282 151
Product purchased for resale 64 328 320 8
--------------------------------------------------------------------------
126 380 302 78
--------------------------------------------------------------------------
Total Wholesale including joint
ventures(1) 2,762 401 336 65
--------------------------------------------------------------------------
--------------------------------------------------------------------------
AGRIUM INC.
Supplemental Information 3
Selected Volumes and Sales Prices
(Unaudited)
Three months ended March 31,
--------------------------------------------------------------------------
2013
--------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's)($/tonne)($/tonne)($/tonne)
--------------------------------------------------------------------------
Retail
Crop nutrients
North America 1,061 580
International 347 539
-----------------------------------
Total crop nutrients 1,408 570 484 86
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Wholesale (1)
Nitrogen
North America
Ammonia 193 606
Urea 322 543
ESN 81 642
Other 231 386
--------------------------------------------------------------------------
Total nitrogen 827 524 300 224
--------------------------------------------------------------------------
Potash
North America 198 473
International 180 327
--------------------------------------------------------------------------
Total potash 378 404 183 221
--------------------------------------------------------------------------
Phosphate 232 698 537 161
Product purchased for resale 763 462 454 8
Ammonium sulfate 72 434 186 248
Other 106
--------------------------------------------------------------------------
Total Wholesale 2,378 501 357 144
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Wholesale equity accounted joint
ventures:
Nitrogen - international 78 496 299 197
Product purchased for resale 79 389 381 8
--------------------------------------------------------------------------
157 442 340 102
--------------------------------------------------------------------------
Total Wholesale including joint
ventures(1) 2,535 498 356 142
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Restated for the results of ESN and Micronutrients businesses that have
transitioned to our Wholesale business unit.
AGRIUM INC.
Supplemental Information 4
Depreciation and Amortization
(Millions of U.S. dollars)
(Unaudited)
Three months ended March 31,
---------------------------------------------------------------------------
2014
--------------------------------------------------------------------------
Cost of General
product and
sold Selling administrative Total
--------------------------------------------------------------------------
Retail 1 68 3 72
Wholesale (1)
Nitrogen 22
Potash 13
Phosphate 13
Ammonium sulfate and other 3
--------------------------------------------------------------------------
51 - 2 53
Other - - 2 2
--------------------------------------------------------------------------
Total (2) 52 68 7 127
--------------------------------------------------------------------------
--------------------------------------------------------------------------
AGRIUM INC.
Supplemental Information 4
Depreciation and Amortization
(Millions of U.S. dollars)
(Unaudited)
Three months ended March 31,
--------------------------------------------------------------------------
2013
--------------------------------------------------------------------------
Cost of General
product and
sold Selling administrative Total
--------------------------------------------------------------------------
Retail 1 49 3 53
Wholesale (1)
Nitrogen 17
Potash 11
Phosphate 14
Ammonium sulfate and other 1
--------------------------------------------------------------------------
43 - 7 50
Other - - 5 5
--------------------------------------------------------------------------
Total (2) 44 49 15 108
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Restated for the results of ESN and Micronutrients businesses that have
transitioned to our Wholesale business unit.
(2) Restated for reclassifications resulting from discontinued operations.
AGRIUM INC.
Supplemental Information 5 (1)
Selected Financial Measures
(Millions of U.S. dollars, unless stated otherwise)
(Unaudited)
Rolling four quarters ended March 31,
--------------------------------------------------------------------------
2014 2013
--------------------------------------------------- ----------------------
Consolidated Consolidated
Retail Agrium Retail Agrium (2)
--------------------------------------------------- ----------------------
Return on operating capital
employed (%) (3a) 16 13 15 24
Return on capital employed
(%) (3b) 9 10 8 17
Average non-cash working
capital to sales (%) 19 16 20 16
Operating coverage ratio (%)
(3c) 73 60 72 48
EBITDA to sales (%) (3d) 8 12 8 17
March 31,
--------------------------------------------------------------------------
2014 2013
--------------------------------------------------- ----------------------
Consolidated Consolidated
Retail Agrium Retail Agrium
--------------------------------------------------- ----------------------
Non-cash working capital 1,512 1,579 1,810 2,285
North America measures Rolling four quarters ended March 31,
--------------------------------------------------------------------------
2014 2013
-------------------------------------- ---------
Retail Retail
-------------------------------------- ---------
Return on operating capital
employed (%) (3a) 26 21
Return on capital employed
(%) (3b) 13 10
EBITDA to sales (%) (3d) 12 9
(1) Certain measures presented in this table are not recognized measures
under IFRS. Refer to Supplemental Information 6.
(2) Restated for reclassifications resulting from discontinued operations.
(3) Adjusted 2014 amounts removing the impact of the purchase gain and
goodwill impairment.
(a) Retail 15%, Retail - North America 18%, Consolidated Agrium 13%.
(b) Retail 8%, Retail - North America 9%, Consolidated Agrium 10%.
(c) Retail 74%, Consolidated Agrium 61%.
(d) Retail 8%, Retail - North America 9%, Consolidated Agrium 12%.
AGRIUM INC.
Supplemental Information 6 (1)
Accompanying Notes to Supplemental Information
---------------------------------------------------------------------------
---------------------------------------------------------------------------
IFRS Financial Measure Definition
---------------------------------------------------------------------------
Average non-cash Rolling four quarter average non-cash working
working capital to capital divided by sales.
sales (2)
Operating coverage Gross profit less earnings (loss) from continuing
ratio (2) operations before finance costs and income taxes,
divided by gross profit.
Non-cash working Current assets less current liabilities, excluding
capital (2) cash and cash equivalents, other current assets,
short-term debt, current portion of long-term debt
and current assets and liabilities held for sale.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Usefulness of Additional
or Non-IFRS Financial
Definition Measure
---------------------------------------------------------------------------
Additional IFRS Financial Measure (As defined in
Canadian Securities Administrators' Staff Notice
52-306 (Revised))
---------------------------------------------------------------------------
EBIT Earnings (loss) from Used to measure
continuing operations operating performance
before finance costs and exclusive of capital
income taxes. structure and income
taxes.
Return on operating Last 12 months' EBIT Used to measure
capital employed (2) less income taxes at a operating performance
tax rate of 27 percent and efficiency of our
(2013 - 27 percent) capital allocation
divided by rolling four process.
quarter average
operating capital
employed. Operating
capital employed
includes non-cash
working capital,
property, plant and
equipment, investments
in associates and joint
ventures and other
assets.
Return on capital Last 12 months' EBIT Used to measure
employed (2) less income taxes at a operating performance
tax rate of 27 percent and efficiency of our
(2013 - 27 percent) capital allocation
divided by rolling four process.
quarter average capital
employed. Capital
employed includes
operating capital
employed, intangibles
and goodwill.
---------------------------------------------------------------------------
Non-IFRS Financial Measure
---------------------------------------------------------------------------
EBITDA Earnings (loss) from Refer to EBIT. Also used
continuing operations as a valuation metric
before finance costs, and as an alternative to
income taxes, cash provided by
depreciation and operating activities.
amortization.
Adjusted EBITDA EBITDA before finance Refer to EBIT and
costs, income taxes, EBITDA. Provides useful
depreciation and information on our
amortization of joint profitability by adding
ventures. back finance costs,
income taxes,
depreciation and
amortization of joint
ventures.
EBITDA to sales EBITDA divided by sales. Used to measure
operating performance
earnings and cash flow
we generate from each
dollar of sales.
Capital expenditures Capital expenditures - Used to evaluate capital
sustaining: Cost of spending on improving
replacements and existing operations and
betterments to our capacity, or on business
facilities. expansion and
development.
Capital expenditures -
investing: Cost of
significant expansion of
our existing operations.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Our definitions and our method of calculation for these measures may not
be directly comparable to similar measures presented by other companies.
(2) These measures are IFRS measures or additional IFRS measures when
calculated using information included in our consolidated financial
statements. They are classified as non-IFRS measures when calculated using
information from our Retail or Wholesale segments because the specific
components are not included in our financial statements or notes.
AGRIUM INC.
Supplemental Information 7
Reconciliation of Selected Additional and Non-IFRS Financial Measures
(Millions of U.S. dollars, unless stated otherwise)
(Unaudited)
Rolling four quarters ended March 31,
---------------------------------------------------------------------------
2014
--------------------------------------------------------------------------
Retail -
North Consolidated
America Retail Agrium
--------------------------------------------------------------------------
EBIT less income taxes
EBIT 882 722 1,444
Income taxes 238 195 390
--------------------------------------------------------------------------
644 527 1,054
--------------------------------------------------------------------------
Average operating capital employed
Average non-cash working capital 1,695 2,263 2,521
Average property, plant and
equipment 783 905 4,615
Average investments in associates
and joint ventures 32 78 630
Average other assets 6 14 110
--------------------------------------------------------------------------
2,516 3,260 7,876
-------------------------------------
Return on operating capital employed
(%) 26 16 13
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Average capital employed
Average operating capital employed 2,516 3,260 7,876
Average intangibles 588 660 687
Average goodwill 1,777 2,043 2,109
--------------------------------------------------------------------------
4,881 5,963 10,672
--------------------------------------------------------------------------
Return on capital employed (%) 13 9 10
--------------------------------------------------------------------------
--------------------------------------------------------------------------
AGRIUM INC.
Supplemental Information 7
Reconciliation of Selected Additional and Non-IFRS Financial Measures
(Millions of U.S. dollars, unless stated otherwise)
(Unaudited)
Rolling four quarters ended March 31,
---------------------------------------------------------------------------
2013
---------------------------------------------------------------------------
Retail -
North Consolidated
America Retail Agrium
---------------------------------------------------------------------------
EBIT less income taxes
EBIT 646 671 2,199
Income taxes 181 188 613
---------------------------------------------------------------------------
465 483 1,586
---------------------------------------------------------------------------
Average operating capital employed
Average non-cash working capital 1,596 2,272 2,540
Average property, plant and
equipment 621 741 3,284
Average investments in associates
and joint ventures 24 85 621
Average other assets 5 19 58
---------------------------------------------------------------------------
2,246 3,117 6,503
--------------------------------------
Return on operating capital employed
(%) 21 15 24
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Average capital employed
Average operating capital employed 2,246 3,117 6,503
Average intangibles 492 576 631
Average goodwill 1,805 2,228 2,323
---------------------------------------------------------------------------
4,543 5,921 9,457
---------------------------------------------------------------------------
Return on capital employed (%) 10 8 17
---------------------------------------------------------------------------
---------------------------------------------------------------------------
FOR FURTHER INFORMATION PLEASE CONTACT:
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
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