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Agrium (AGU) Posts Loss in Q3, Shareholders Approve Merger

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Agrium Inc. (AGU - Free Report) posted net loss (attributable to its equity holders) of $41 million or 29 cents per share in the third quarter of 2016, as against net earnings of $101 million or 72 cents per share recorded a year ago. The bottom line in the reported quarter was hurt by weaker selling prices across all nutrients, low demand for crop protection products due to low pest and disease pressure in U.S., delayed harvest in North America, and a one-time cost related to the company’s proposed merger with Potash Corporation of Saskatchewan Inc. (POT - Free Report) .

Agrium’s adjusted loss came in at 15 cents per share for the reported quarter. Analysts polled by Zacks were expecting earnings per share of 12 cents on an average.

Revenues decreased 11.1% year over year to $2,245 million in the reported quarter. The top line also missed the Zacks Consensus Estimate of $2,438 million.

Shares of the company fell 1.1% to close at $90.25 on Nov 3.

Segment Review

Revenues from the Retail segment decreased 7.7% year over year to $1.86 billion, while gross profit fell 2.4% to $482 million. Sales were negatively impacted by low crop nutrient selling prices despite higher sales volumes. Profit declined due to lower sales of crop protection products.

Within the Retail business, crop nutrient sales fell 13.7% year over year to $502 million, owing to weaker global pricing across all nutrients. The segment saw quarterly sales volumes of crop nutrients rise 4% from the prior-year quarter as higher volumes in Canada and South America more than offset lower volumes in the U.S. Crop protection sales decreased 5.5% to $983 million as limited pest and disease pressure as well as high crop condition ratings and yields in North America reduced demand. Seed sales dropped 1.7% year over year to $59 million in the reported quarter, while Merchandise sales rose by 5.4% to $175 million.

Sales from the Wholesale segment declined 23% year over year to $518 million, as realized sales prices were lower across all products. Gross profit was $84 million in the reported quarter, declining significantly from $218 million in the year-ago quarter.

Within the Wholesale business, nitrogen gross profits plunged roughly 54.6% year over year to $59 million, attributable to significantly lower global benchmark nitrogen prices, partly offset by reduced cost of production. Potash and phosphate gross profits plummeted 97.6% and 64.5% year over year to $1 million and $11 million, respectively. The plunge was primarily due to downward pressure on prices.

Sales volumes decreased roughly 2.8% year over year to 739,000 tons due to outages at the Redwater and Carseland facility as well as delayed ammonia fall application. Potash sales volumes were 496,000 tons in the reported quarter compared with 384,000 tons in the prior-year quarter. Phosphate sales volumes rose 3.3% to 278,000 tons.

Financial Position

Agrium ended the third quarter with cash and cash equivalents of $311 million, down roughly 58.7% year over year. Long-term debt dropped around 2.6% year over year to $4,400 million as of Sep 30, 2016. Cash used in operations increased around 3.1% year over year to $233 million in the quarter.

The company declared a quarterly dividend of 87.5 cents per share.

Outlook

Agrium provided its annual earnings guidance for 2016 in the range of $4.60−$5.00 per share, down from its prior view of $5.00–$5.30. The company trimmed its outlook due to a persistent challenging pricing environment for all nutrients and low demand for crop protection products in the third quarter.

Agrium raised the lower end of its full-year nitrogen sales volume guidance to 3.6−3.7 million tons from 3.5−3.7 million tons, but lowered its potash sales volume expectation to 2.1−2.2 million tons from the prior view of 2.3−2.4 million tons.

The company reiterated its expectation for retail crop nutrient sales volumes for 2016 in the range of 9.8–10.2 million tons.

Proposed Merger

Agrium held a Special Meeting for shareholders regarding the proposed merger with Potash Corp. on Nov 3. The company said that around 98% of the shares and voting options voted at the meeting were in favor of the merger. Separately, shareholders of Potash Corp. also voted in favor of the merger.

The merger is expected to conclude in mid 2017, subject to customary closing conditions.

AGRIUM INC Price, Consensus and EPS Surprise

 

AGRIUM INC Price, Consensus and EPS Surprise | AGRIUM INC Quote

Zacks Rank

Agrium currently has a Zacks Rank #3 (Hold).

Some better-ranked companies in the basic materials space include E. I. du Pont de Nemours and Company (DD - Free Report) and FMC Corp. (FMC - Free Report) , both holding a Zacks Rank #2 (Buy).

FMC Corp has a long-term growth rate of 10.88%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DuPont has a long-term growth rate of 7.88%.

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