Agrium Inc.
NYSE : AGU
TSX : AGU

Agrium Inc.

July 27, 2005 07:00 ET

Agrium Achieves Record Results for the Quarter and the First Half

CALGARY, ALBERTA--(CCNMatthews - July 27, 2005) - Agrium Inc. (TSX:AGU) (NYSE:AGU)

ALL AMOUNTS ARE STATED IN U.S.$

Agrium Inc. announced today that net earnings for the second quarter of 2005 were a record $133-million ($0.99 diluted earnings per share), an increase of 80 percent over net earnings of $74-million ($0.52 diluted earnings per share) for the same period in 2004. Net earnings for the first six months of the year were a record $157-million ($1.18 diluted earnings per share), almost double 2004 net earnings of $85-million ($0.60 diluted earnings per share) for the same period. This quarter marks the sixth consecutive quarter of year-over-year earnings improvement.

Our Wholesale per tonne margins increased year-over-year for all three of our major product groups of potash, nitrogen and phosphate. Higher selling prices due to tight supply/demand fundamentals and increased sales into higher margin regions more than offset increases in raw material costs. Total sales volumes in our Wholesale businesses for the first half of 2005 exceeded those of the first half of 2004. Sales volumes for the quarter were similar to the previous year as lower opening inventories constrained sales. We ended the second quarter with very low inventories for most products.

Results from our Retail business kept pace with last year's record performance with increases in seed, crop protection products and fertilizer sales. We benefited from our geographical diversification as positive results from our U.S.-based retail operations offset lower South American retail margins. South American retail results are expected to improve in the second half as the region enters its spring season and we begin to realize the full benefit of the integration of the newly acquired South American retail assets.

"Once again, we achieved strong results from all business segments, and expect our strong performance to continue," said Mike Wilson, Agrium's President and CEO. "We increased the profitability of all our major Wholesale products, and our Retail business matched its record performance of last year. We succeeded in securing more gas for Kenai, and we continue to pursue opportunities to expand our distribution business such as our recent announcement to acquire Imperial Oil's Western Canadian fertilizer distribution assets. We generated $160-million in cash from operations in the quarter and used $40-million of cash to repurchase two million common shares."

Fundamentals for all three nutrients remain strong with limited new capacity coming on stream for the balance of the year. Crop prices have improved over the last few months, which should be positive for the upcoming fall season. We are issuing guidance for the year of $2.20 to $2.40 diluted earnings per share, or $1.02 to $1.22 for the second half of 2005.

KEY DEVELOPMENTS

- In the second quarter, we generated EBITDA of $262-million. Both nitrogen and potash margins averaged close to $100/tonne in the second quarter with phosphate margins improving to $61/tonne. In addition to prices being driven by tight supply/demand, this is also partly as a result of redirecting sales into higher margin regions. Retail, potash and phosphate contributed over $140-million of EBITDA in the first half of 2005.

- Our overall natural gas cost for the second quarter was $4.38/MMBtu, a reflection of our lower cost gas in Alberta, Argentina and Alaska, as well as our successful hedging program. For the remainder of 2005, approximately 60 percent of our gas is advantaged either through gas hedges or through low-cost international gas contracts.

- On July 14, 2005, we successfully concluded natural gas contract negotiations that will enable us to extend operations of our Kenai, Alaska nitrogen facility for another year. As of November 2005, Agrium will operate one ammonia plant and one urea plant at this site.

- In June, we reached an agreement in principle with Imperial Oil to acquire its Western Canadian fertilizer distribution assets at over 190 sites for $22-million. This agreement includes exclusive fertilizer supply agreements with the independent operators of these locations. The transaction is expected to close in the third quarter of 2005, subject to a definitive purchase and sale agreement and due diligence. We recently received regulatory approval for this transaction.

- We continue to be recognized for corporate governance and responsibility, and in June were named one of the Best 50 Corporate Citizens in Canada by Corporate Knights. Corporate Knights ranks companies in five categories: environment; international stakeholder relations and human rights; product safety and business practices; community relations; and employee relations and diversity in the workplace.

MANAGEMENT'S DISCUSSION AND ANALYSIS

July 27, 2005

The following interim Management's Discussion and Analysis (MD&A) updates the annual MD&A included in our 2004 Annual Report to Shareholders, to which readers are referred. No update is provided where an item is not material or where there has been no material change from the discussion in our annual MD&A.

OVERVIEW OF CONSOLIDATED FINANCIAL HIGHLIGHTS

Net Earnings

Agrium's second quarter consolidated net earnings were $133-million, an increase of 80 percent over net earnings of $74-million for the same quarter of 2004. Diluted earnings per share for the second quarter of 2005 were $0.99 compared to $0.52 for the second quarter of 2004.

Consolidated net earnings for the six month period ended June 30, 2005 were $157-million, or $1.18 diluted earnings per share, an increase of $72-million and $0.58 over net earnings of $85-million and $0.60 diluted earnings per share reported for the same period in 2004. Comparative information has been restated for a change in accounting policy to reclassify preferred shares as debt (refer to note two of the financial statements).

Earnings before interest and taxes (EBIT) increased by $97-million to $224-million for the second quarter of 2005 compared to EBIT of $127-million for the same period in 2004. EBIT for the six month period ended June 30, 2005 were $276-million, an increase of $118-million over EBIT of $158-million reported in the first six months of 2004.

The increase in 2005 second quarter and year-to-date earnings compared to last year is largely attributable to higher per tonne margins for all Wholesale product lines reflecting increasing prices in continuing tight supply/demand environments in both our domestic and international markets. Gas hedging gains contributed $7-million to gross margins for the first six months of 2005. Higher prices more than offset increased cost of product from higher gas costs. Sales volumes were constant for the second quarter but up four percent for the year-to-date compared to the same periods in 2004.

Cash Provided by Operating Activities

Operating activities during the second quarter of 2005 generated $160-million of cash compared to $25-million for the same quarter of 2004. Operating activities for the six months ended June 30, 2005 provided cash of $285-million compared to $126-million for the same period of 2004. The majority of increased cash from operations for both the second quarter and year-to-date is due to the increase in net earnings. Improved collection rates of receivables combined with a larger reduction of inventory also contributed to the increased cash from operations for both the quarter and the six months ended June 30, 2005.

Financial Position

Our strong opening cash position at the beginning of the year has been maintained at $427-million. Cash provided by operating activities continued to increase, and has been used to repurchase shares at a cash cost of $40-million during the second quarter of 2005 and to redeem $175-million eight percent preferred securities on February 14, 2005, which together reduced dilution in our earnings per share for the six month period by $0.09 per share. We also increased capital expenditures and acquired retail outlets in South America.

Consolidated accounts receivable have increased by $53-million largely due to higher sales prices for all products. Accounts receivable as a percentage of sales have declined from 41 percent at June 30, 2004 to 39 percent at June 30, 2005. Consolidated inventory has increased by $25-million. North America Wholesale inventory has declined by $24-million, while South America Wholesale inventory has increased $5-million due to differences in demand. Retail inventory quantities have increased by $44-million primarily due to accelerated purchasing of product for resale.

Current liabilities are up $77-million compared to prior year, largely due to an increase in accruals for income tax payables of $49-million, consistent with the increase in EBIT over the same period. Other liabilities increased $61-million compared to June 30, 2004 largely due to accruals in 2004 related to the future closure of our Kenai, Alaska nitrogen facility.

Business Segment Performance

Retail

- Second quarter 2005 EBIT for Retail of $51-million was relatively constant compared to the same period last year. Higher fertilizer and seed prices and increased seed volumes were the primary contributors to an overall five percent increase in net sales. Disease pressure in the Western U.S. and increased insect activity throughout the United States more than offset lower herbicide prices resulting in a two percent increase in chemical revenues over the same period last year.

North America Wholesale

- EBIT for the second quarter grew to $175-million, an increase of $101-million over 2004 second quarter EBIT of $74-million.

- Gross profit for this same time period was $224-million, an increase of $87-million over the $137-million gross profit reported for the second quarter of 2004. Nitrogen contributed $67-million toward North America Wholesale's overall increase, which primarily came from $28-million growth in ammonia gross profit and $33-million growth in urea gross profit. Ammonia sales prices and volumes were substantially increased in both our international and domestic markets. Similarly urea prices were up but sales volumes were down primarily due to reduced urea production at our Kenai, Alaska facility. Increased sales prices and volumes over the comparative period are a reflection of a tight supply/demand balance world-wide. Potash gross profit increase of $18-million for the second quarter of 2005 over the same quarter last year was due to higher prices. Strong international demand over the past year has resulted in lower inventory volumes available for domestic sales.

- Operating expenses were down by $14-million in the second quarter of 2005 compared to the same period of 2004 primarily due to the elimination of legal expenses and earn-out obligations following the settlement of litigation related to our Kenai facility at the end of 2004 and improved returns on our non-qualifying gas hedges.

- As a result of the successful negotiation of gas supply contracts with Cook Inlet producers, the planned closure of our Kenai, Alaska nitrogen facility has been deferred from November 2005 to November 2006. As of November 2005, we will operate one ammonia plant and one urea plant, with annual net nitrogen sales capacity of approximately 910,000 tonnes.

South America Wholesale

- South America Wholesale second quarter EBIT and gross profit were $25-million and $30-million respectively, both up $4-million from 2004. This growth is primarily related to increased urea prices, which trend with the Black Sea urea price that has been driven up due to high international demand. The effect of higher pricing was partially offset by decreases in volumes due to a combination of delayed purchasing by local customers and lower demand in Brazil, our main export market.

Other

- EBIT for our Other non-operating business segment for the second quarter of 2005 was down $7-million from the same period last year. The reduction was primarily due to increased long-term incentive plan expenses and higher expenses related to the business development opportunities.



SELECTED QUARTERLY INFORMATION
(Unaudited, in millions of U.S. dollars, except per share
information)

2005 2004 (a) 2003 (a)
--------------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
--------------------------------------------------

Net sales 1,180 537 720 672 1,011 435 637 561
Gross Profit 375 171 254 231 283 142 204 172
Net earnings (loss) 133 24 98 83 74 11 (113) 22
Earnings (loss)
per share
-basic 1.01 0.18 0.75 0.63 0.56 0.08 (0.90) 0.17
-diluted 0.99 0.18 0.71 0.60 0.52 0.08 (0.90) 0.17



(a) Amounts have been restated to reflect the January 1, 2005
adoption of the revised Canadian accounting standards
reclassifying preferred shares to debt (see note two to the
financial statements).


The fertilizer and agricultural retail businesses are seasonal in nature. Consequently, quarter-to-quarter results are not directly comparable. For purposes of comparison, fertilizer sales volumes are best measured on a fertilizer year basis, corresponding to the period from post-harvest application through to spring planting application. Fertilizer year sales are measured from July 1st to June 30th.

NON-GAAP MEASURES

In the discussion of our performance for the quarter, in addition to the primary measures of earnings and earnings per share, we make reference to EBIT (earnings before interest expense and income taxes) and EBITDA (earnings before interest expense, income taxes, depreciation, amortization and asset impairment). We consider EBIT and EBITDA to be useful measures of performance because income tax jurisdictions and business segments are not synonymous, and we believe that allocation of income tax charges distorts the comparability of historical performance for the different business segments. Similarly, financing and related interest charges cannot be allocated to all business segments on a basis that is meaningful for comparison with other companies. EBIT and EBITDA measures are also used extensively in the covenants relating to our financing arrangements.

EBIT and EBITDA are not recognized measures under GAAP, and our method of calculation may not be comparable to other companies. EBIT should therefore not be used as an alternative to net earnings (loss) determined in accordance with GAAP as an indicator of our performance. Similarly, EBITDA should not be used as an alternative to cash provided by (used in) operating activities as determined in accordance with GAAP.

KEY RISKS AND UNCERTAINTIES

We anticipate strong demand for our North American retail and wholesale products as record rainfall in Western Canada and an increase in U.S. corn acreage should contribute to increased nutrient removal in 2005. Crop prices have also increased over the past two months improving the outlook for farm incomes. North American producer supplies are tight entering the second half of 2005 with inventories for the three main crop nutrients well below the five-year average. In South America, the nutrient demand outlook remains uncertain following a decline in demand through the first half of 2005.

The nitrogen market outlook remains positive as there is limited new global capacity expected in the second half of 2005. The combination of strong Chinese domestic demand and the implementation of a 30 percent tax on urea exports should continue to restrict the amount of Chinese product on the market. However, further changes in China's export policy could impact the global trade balance. The rise in global energy prices should continue to impact producer costs in regions such as Europe, North America, Indonesia, India, and China, which may impact global operating rates.

Global potash fundamentals are expected to remain strong in the second half of 2005 supported by continued demand growth and limited new supply additions. Offshore demand for potash continues to increase in spite of an anticipated reduction in Brazilian imports in 2005. Phosphate market fundaments have improved in the past three months due to strong offshore demand and a subsequent reduction in U.S. producer inventories. Phosphate import demand growth outside of Brazil and China is expected to support phosphate markets in the second half of 2005. The expansion of China's domestic phosphate industry is potentially the largest source of short-term uncertainty.

OTHER

Agrium Inc. is a leading global producer and marketer of agricultural nutrients and industrial products and a major retail supplier of agricultural products and services in both North and South America. Agrium produces and markets three primary groups of nutrients: nitrogen, phosphate and potash as well as controlled release fertilizers and micronutrients. Agrium's strategy is to grow through incremental expansion of its existing operations and acquisitions as well as the development, commercialization and marketing of new products and international opportunities.

Certain statements in this press release constitute forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties, including those referred to in the management discussion and analysis section of the Corporation's most recent annual report to shareholders, which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. A number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, weather conditions, the future supply, demand, price level and volatility of natural gas, future prices of nitrogen, phosphate and potash, the differential pricing of natural gas in various markets, the future gas prices and gas availability at Kenai, the exchange rates for U.S., Canadian, Argentine, and Chilean currencies, South American government policy, South American domestic fertilizer consumption, China's urea trade policies and volumes, future fertilizer inventory levels, future nitrogen, potassium and phosphate consumption in North America, future crop prices, future levels of nitrogen imports into North America and future additional fertilizer capacity and operating rates. Agrium disclaims any intention or obligation to update or revise any forward-looking information as a result of new information or future events.

A WEBSITE SIMULCAST of the 2005 2nd Quarter Conference Call will be available in a listen-only mode beginning Wednesday, July 27th at 1:30 p.m. MT (3:30 p.m. ET). Please visit the following website: www.agrium.com



SECOND QUARTER 2005

INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2005


AGRIUM INC.
Consolidated Statements of Operations and Retained Earnings
(Millions of U.S. dollars, except per share information)
(Unaudited)

Three months Six months
ended ended
June 30, June 30,
--------------- ---------------
2005 2004 2005 2004
--------------- ---------------
Restated Restated
(note 2) (note 2)
Sales $ 1,239 $ 1,055 $ 1,815 $ 1,519
Direct freight 59 44 98 73
--------------- ---------------
Net sales 1,180 1,011 1,717 1,446
Cost of product 805 728 1,171 1,021
--------------- ---------------
Gross profit 375 283 546 425
--------------- ---------------

Expenses
Selling, general and administrative 94 77 165 143
Depreciation and amortization 38 39 76 77
Royalties and other taxes 12 8 22 14
Other expenses (income) 7 32 7 33
--------------- ---------------
151 156 270 267
--------------- ---------------

Earnings before interest expense and
income taxes 224 127 276 158
Interest on long-term debt 11 16 25 33
Other interest 1 2 1 2
--------------- ---------------
Earnings before income taxes 212 109 250 123
--------------- ---------------
Current income taxes 64 32 75 37
Future income taxes 15 3 18 1
--------------- ---------------
Income taxes 79 35 93 38
--------------- ---------------
Net earnings 133 74 157 85
--------------- ---------------
Retained earnings - beginning of
period (as reported) 416 155 398 145
Cumulative change in accounting
policy (note 2) - (3) (6) (4)
--------------- ---------------
Retained earnings - beginning of
period (as restated) 416 152 392 141
Common share dividends declared (7) (7) (7) (7)
Common share repurchase (note 4) (30) - (30) -
--------------- ---------------
Retained earnings - end of period $ 512 $ 219 $ 512 $ 219
--------------- ---------------
--------------- ---------------

Earnings per share (note 7)
Basic $ 1.01 $ 0.56 $ 1.19 $ 0.65

Diluted $ 0.99 $ 0.52 $ 1.18 $ 0.60




AGRIUM INC.
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
(Unaudited)
Three months Six months
ended ended
June 30, June 30,
--------------- ---------------
2005 2004 2005 2004
--------------- ---------------
Restated Restated
Operating (note 2) (note 2)
Net earnings $ 133 $ 74 $ 157 $ 85
Items not affecting cash
Depreciation and amortization 38 39 76 77
Gain on disposal of assets and
investments 2 - 2 (1)
Future income taxes 15 3 18 1
Foreign exchange 1 5 (2) (2)
Other 2 3 11 6
Net change in non-cash working capital (31) (99) 23 (40)
--------------- ---------------
Cash provided by operating activities 160 25 285 126
--------------- ---------------

Investing
Capital expenditures (32) (22) (53) (35)
Increase in other assets (1) (3) (9) (5)
Proceeds from disposal of assets and
investments 1 1 2 2
Net change in non-cash working
capital - - (11) -
Other - - - 2
--------------- ---------------
Cash used in investing activities (32) (24) (71) (36)
--------------- ---------------

Financing
Common shares 17 2 26 3
Common share repurchase (40) - (40) -
Long-term debt (9) (9) (21) (91)
Bank indebtedness 5 - 5 1
Common share dividends paid - - (7) (7)
Preferred securities repayment - - (175) -
--------------- ---------------
Cash used in financing activities (27) (7) (212) (94)
--------------- ---------------

Increase (decrease) in cash and cash
equivalents 101 (6) 2 (4)
Cash and cash equivalents -
beginning of period 326 202 425 200
--------------- ---------------
Cash and cash equivalents - end of
period $ 427 $ 196 $ 427 $ 196
--------------- ---------------
--------------- ---------------


AGRIUM INC.
Consolidated Balance Sheet
(Millions of U.S. dollars)
(Unaudited)

As at As at
June 30, December 31,
--------------- ---------------
2005 2004 2004
------- ------- --------
Restated Restated
ASSETS (note 2) (note 2)
Current assets
Cash and cash equivalents $ 427 $ 196 $ 425
Accounts receivable 489 436 388
Inventories 419 394 447
Prepaid expenses 47 48 56
------- ------- --------
1,382 1,074 1,316
Property, plant and equipment 1,204 1,197 1,239
Other assets 83 74 82
Future income tax assets 25 - 24
------- ------- --------
$ 2,694 $ 2,345 $ 2,661
------- ------- --------
------- ------- --------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 10 $ - $ -
Accounts payable and accrued
liabilities 541 483 472
Current portion of long-term debt 55 46 60
------- ------- --------
606 529 532
Long-term debt
Recourse debt 470 498 471
Non-recourse debt 55 99 69
Preferred securities (note 2, 3) - 175 175
------- ------- --------
525 772 715
Other liabilities 259 198 257
Future income tax liabilities 225 134 209
------- ------- --------
1,615 1,633 1,713
------- ------- --------

Shareholders' equity
Share capital
Authorized: unlimited common shares
Issued: common shares:
2005 - 132 million
(June 2004 - 131 million,
December 2004 - 132 million) (note 4) 571 544 553
Contributed surplus 3 1 2
Retained earnings 512 219 392
Cumulative translation adjustment (7) (52) 1
------- ------- --------
1,079 712 948
------- ------- --------
$ 2,694 $ 2,345 $ 2,661
------- ------- --------
------- ------- --------


AGRIUM INC.
Summarized Notes to the Consolidated Financial Statements
For the six months ended June 30, 2005
(Millions of U.S. dollars, except per share amounts)
(Unaudited)


1. SIGNIFICANT ACCOUNTING POLICIES

The Corporation's accounting policies are in accordance with accounting principles generally accepted in Canada and are consistent with those outlined in the annual audited financial statements except where stated below. These interim consolidated financial statements do not include all disclosures normally provided in annual financial statements and should be read in conjunction with the Corporation's audited consolidated financial statements for the year ended December 31, 2004. In management's opinion, the interim consolidated financial statements include all adjustments necessary to present fairly such information.

Certain comparative figures have been reclassified to conform to the current year's presentation.

2. CHANGE IN ACCOUNTING POLICY

Effective January 1, 2005, the Corporation adopted the revised Canadian accounting standards for disclosure and presentation of financial instruments. The amendment requires obligations that must or could be settled with a variable number of the entity's own equity instruments to be classified as liabilities. Consequently, the Corporation reclassified from equity to liabilities its eight percent preferred securities, redeemed February 14, 2005 and its six percent preferred securities, converted to common shares in January 2004. This change was applied retroactively with restatement of prior periods. The effect of the adoption on prior periods and the cumulative impact of retroactive restatement as at the date of adoption are presented below as increases (decreases):



As at As at
June 30, December 31,
--------------- ---------------
2004 2004
--------------- ---------------
Balance Sheet
Other assets $ 5 $ 5
Long-term debt 175 175
Future income tax liabilities 4 8
Preferred securities (172) (172)
Retained earnings (2) (6)

Three months Six months
ended June 30, ended June 30,
--------------- ---------------
2004 2004
--------------- ---------------
Income Statement
Interest on long-term debt $ 3 $ 7
Future income tax expense (2) (5)

Earnings per share
Net earnings available for basic
earnings per share 1 2
Basic earnings per share - 0.02
Diluted earnings per share - -


3. PREFERRED SECURITIES

On February 14, 2005, the Corporation redeemed the $175-million, eight percent redeemable preferred securities for cash. The redemption price was equal to the principal amount of the securities plus accrued and unpaid interest to the date of redemption.

In January 2004, pursuant to the Corporation's plan to redeem the six percent preferred securities, all holders of the convertible, redeemable preferred securities elected to convert the securities into common shares at the stated conversion price of $11.9677 per share, resulting in the issuance of an additional 4.18 million common shares.

4. SHARE CAPITAL

On April 28, 2005, the Corporation announced approval of a normal course issuer bid to repurchase up to 13 million of its common shares (approximately 10 percent of the Corporation's issued and outstanding common shares). Shares will be repurchased for cancellation on the open market between May 3, 2005 and May 2, 2006 at the Corporation's discretion and funded from existing cash.

During the quarter, the Corporation repurchased for cancellation 2,046,400 of its common shares at an average price per share of $19.34, resulting in a net cost of $40-million. The repurchases resulted in a reduction of share capital of $10-million. The excess net cost over the average book value of the shares of $30-million has been recorded as a reduction of retained earnings.

5. EMPLOYEE FUTURE BENEFITS

The total net employee future benefits expense for the Corporation's pension and post-retirement benefit plans are computed as follows:



Three months ended Six months ended
June 30, June 30,
------------------- -----------------
2005 2004 2005 2004
------------------- -----------------
Defined benefit pension plans $ 2 $ 2 $ 4 $ 4
Post-retirement benefit plans 1 1 3 3
Defined contribution pension plans 2 2 7 7
---------- -------- ------- --------
Total expense $ 5 $ 5 $ 14 $ 14
---------- -------- ------- --------
---------- -------- ------- --------


6. STOCK-BASED COMPENSATION

The Corporation began prospectively expensing the fair value of stock options granted in 2003 over their vesting period. In accordance with the prospective method of adoption, the Corporation has recorded no compensation expense for stock options granted prior to January 1, 2003 and will continue to provide pro forma disclosure of the effect on net earnings and earnings per share had the fair value been expensed. The following table summarizes the pro forma disclosure for stock options granted prior to 2003 that have not been expensed.



Three months ended June 30,
--------------------------------------------------
2005 2004
------------------------ ------------------------
As Reported Pro forma As Reported Pro forma
------------------------ ------------------------
Restated Restated
(note 2) (note 2)
Net earnings $ 133 $ 133 $ 74 $ 73
Earnings per share
Basic $ 1.01 $ 1.00 $ 0.56 $ 0.56
Diluted $ 0.99 $ 0.99 $ 0.52 $ 0.51

Six months ended June 30,
--------------------------------------------------
2005 2004
------------------------ ------------------------
As Reported Pro forma As Reported Pro forma
------------------------ ------------------------
Restated Restated
(note 2) (note 2)
Net earnings $ 157 $ 156 $ 85 $ 83
Earnings per share
Basic $ 1.19 $ 1.18 $ 0.65 $ 0.64
Diluted $ 1.18 $ 1.17 $ 0.60 $ 0.59

7. EARNINGS PER SHARE

The following table summarizes the computation of net earnings per
share:

Three months ended Six months ended
June 30, June 30,
------------------- -----------------
2005 2004 2005 2004
------------------- -----------------
Restated Restated
Numerator: (note 2) (note 2)
Net earnings and numerator
for basic earnings per share $ 133 $ 74 $ 157 $ 85
------------------- -----------------

Preferred securities charges
(net of tax) - 1 - 2
------------------- -----------------
Numerator for diluted earnings
per share 133 75 157 87
------------------- -----------------

Denominator - weighted average
common shares outstanding:
For basic earnings per share 132 131 132 130
------------------- -----------------

Dilutive instruments:
Stock options (a) 2 1 2 1
Preferred securities
converted to common shares:
$175-million, eight percent
(note 3)(a) - 13 - 13
------------------- -----------------
For diluted earnings per share 134 145 134 144
------------------- -----------------
------------------- -----------------

Basic earnings per share $1.01 $0.56 $1.19 $0.65
Diluted earnings per share $0.99 $0.52 $1.18 $0.60

(a) For diluted earnings per share, these dilutive instruments are
added back only when the impact of the instrument is dilutive to
basic earnings per share.


There were 132 million common shares outstanding at June 30, 2005 (2004 - 131 million). As at June 30, 2005, the Corporation has outstanding approximately seven million (2004 - nine million) options and options with tandem stock appreciation rights to acquire common shares.

8. SEASONALITY

The fertilizer and agricultural retail businesses are seasonal in nature. Sales are concentrated in the spring and fall planting seasons while produced inventories are accumulated throughout the year. Cash collections generally occur after the planting seasons in North and South America.

9. SEGMENTED INFORMATION

The Corporation's primary activity is the production and wholesale marketing of nitrogen, potash and phosphate and the retail sales of fertilizers, chemicals and other agricultural inputs and services. The Corporation operates principally in Canada, the United States and South America.

Net sales between segments are accounted for at prices, which approximate fair market value and are eliminated on consolidation. The reportable segment entitled "Other" includes Corporate functions and inter-segment eliminations.



Schedule 1

AGRIUM INC.
Segmentation
(Unaudited - millions of U.S. dollars)


Three Months Ended June 30
-----------------------------------------------------
Wholesale
---------------------------------
Retail North America South America
-----------------------------------------------------
2005 2004 2005 2004 2005 2004
-----------------------------------------------------

Net sales
- external $ 513 $ 490 $ 626 $ 488 $ 41 $ 33
- inter-segment - - 34 27 4 3
-----------------------------------------------------
Total net sales 513 490 660 515 45 36
Cost of product 394 372 436 378 15 10
-----------------------------------------------------
Gross profit 119 118 224 137 30 26
Gross profit % 23% 24% 34% 27% 67% 72%
-----------------------------------------------------
-----------------------------------------------------

Selling Expenses $ 63 $ 61 $ 5 $ 4 $ - $ -

EBITDA (1) $ 55 $ 57 $ 203 $ 102 $ 29 $ 25

EBIT (2) $ 51 $ 52 $ 175 $ 74 $ 25 $ 21



Three Months Ended June 30
-----------------------------------------------------
Other Total
-----------------------------------------------------
2005 2004 2005 2004
-----------------------------------------------------


Net sales
- external $ - $ - $ 1,180 $ 1,011
- inter-segment (38) (30) - -
-----------------------------------------------------
Total net sales (38) (30) 1,180 1,011
Cost of product (40) (32) 805 728
-----------------------------------------------------
Gross profit 2 2 375 283
Gross profit % (5%) (7%) 32% 28%
-----------------------------------------------------
-----------------------------------------------------

Selling Expenses $ - $ (1) $ 68 $ 64

EBITDA (1) $ (25) $ (18) $ 262 $ 166

EBIT (2) $ (27) $ (20) $ 224 $ 127



Six Months Ended June 30
-----------------------------------------------------
Wholesale
---------------------------------
Retail North America South America
-----------------------------------------------------
2005 2004 2005 2004 2005 2004
-----------------------------------------------------

Net sales
- external $ 692 $ 645 $ 966 $ 748 $ 59 $ 53
- inter-segment - - 62 43 5 4
-----------------------------------------------------
Total net sales 692 645 1,028 791 64 57
Cost of product 522 480 695 572 20 17
-----------------------------------------------------
Gross profit 170 165 333 219 44 40
Gross profit % 25% 26% 32% 28% 69% 70%
-----------------------------------------------------
-----------------------------------------------------

Selling Expenses $ 114 $ 109 $ 9 $ 8 $ - $ -

EBITDA (1) $ 56 $ 56 $ 300 $ 167 $ 42 $ 38

EBIT (2) $ 48 $ 47 $ 243 $ 110 $ 34 $ 31



Six Months Ended June 30
-----------------------------------------------------
Other Total
-----------------------------------------------------
2005 2004 2005 2004
-----------------------------------------------------

Net sales
- external $ - $ - $ 1,717 $ 1,446
- inter-segment (67) (47) - -
-----------------------------------------------------
Total net sales (67) (47) 1,717 1,446
Cost of product (66) (48) 1,171 1,021
-----------------------------------------------------
Gross profit (1) 1 546 425
Gross profit % 1% (2%) 32% 29%
-----------------------------------------------------
-----------------------------------------------------

Selling Expenses $ (1) $ (1) $ 122 $ 116

EBITDA (1) $ (46) $ (26) $ 352 $ 235

EBIT (2) $ (49) $ (30) $ 276 $ 158

(1) Earnings (loss) before interest expense, income taxes,
depreciation, amortization and asset impairment.

(2) Earnings (loss) before interest expense and income taxes.


Schedule 2a

AGRIUM INC.
Product Lines
Three Months Ended June 30, 2005
(Unaudited - millions of U.S. dollars)

2005
---------------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------------
North America
Wholesale
Nitrogen (1)
Ammonia $ 213 $ 65 681 $ 313 $ 95
Urea 171 62 604 283 103
Nitrate, Sulphate
and Other 105 31 490 214 63
---------------------------------------------------
Total Nitrogen 489 158 1,775 275 89
Phosphate 96 21 342 280 61
Potash (2) 75 45 468 160 96
---------------------------------------------------
660 224 2,585 255 87


South America
Wholesale (1) 45 30 154 292 195


Retail (3)
Fertilizers 246 55
Chemicals 189 33
Other 78 31
------------------
513 119

Other inter-segment
eliminations (38) 2
------------------

Total $ 1,180 $ 375
------------------


2004
---------------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------------
North America
Wholesale
Nitrogen (1)
Ammonia $ 136 $ 37 506 $ 269 $ 73
Urea 140 29 683 205 42
Nitrate, Sulphate
and Other 97 25 521 186 48
---------------------------------------------------
Total Nitrogen 373 91 1,710 218 53
Phosphate 85 19 336 253 57
Potash (2) 57 27 510 112 53
---------------------------------------------------
515 137 2,556 201 54


South America
Wholesale (1) 36 26 190 189 137


Retail (3)
Fertilizers 236 57
Chemicals 185 32
Other 69 29
------------------
490 118

Other inter-segment
eliminations (30) 2

Total $ 1,011 $ 283
------------------

(1) International nitrogen sales were 523,000 tonnes (2004 -
533,000); net sales were $136-million (2004 - $87-million) and
gross profit was $80-million (2004 - $40-million).

(2) International potash sales were 198,000 tonnes (2004 - 199,000);
net sales were $27-million (2004 - $18-million) and gross profit
was $18-million (2004 - $10-million).

(3) International Retail net sales were $28-million (2004 -
$29-million) and gross profit was $6-million (2004 - $7-million).


Schedule 2b

AGRIUM INC.
Product Lines
Six Months Ended June 30, 2005
(Unaudited - millions of U.S. dollars)


2005
---------------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------------
North America
Wholesale
Nitrogen (1)
Ammonia $ 288 $ 76 954 $ 302 $ 80
Urea 297 98 1,106 269 89
Nitrate, Sulphate
and Other 169 46 787 215 58
---------------------------------------------------
Total Nitrogen 754 220 2,847 265 77
Phosphate 141 31 500 282 62
Potash (2) 133 82 869 153 94
---------------------------------------------------
1,028 333 4,216 244 79


South America
Wholesale (1) 64 44 238 269 185


Retail (3)
Fertilizers 340 78
Chemicals 257 55
Other 95 37
------------------
692 170

Other inter-segment
eliminations (67) (1)
------------------

Total $ 1,717 $ 546
------------------


2004
---------------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------------

North America
Wholesale
Nitrogen (1)
Ammonia $ 210 $ 60 788 $ 266 $ 76
Urea 206 45 983 210 46
Nitrate, Sulphate
and Other 143 37 762 188 49
---------------------------------------------------
Total Nitrogen 559 142 2,533 221 56
Phosphate 128 30 499 257 60
Potash (2) 104 47 949 110 50
---------------------------------------------------
791 219 3,981 199 55


South America
Wholesale (1) 57 40 294 194 136


Retail (3)
Fertilizers 315 77
Chemicals 245 53
Other 85 35
------------------
645 165

Other inter-segment
eliminations (47) 1
------------------

Total $ 1,446 $ 425
------------------

(1) International nitrogen sales were 801,000 tonnes (2004 -
852,000); net sales were $191-million (2004 - $154-million) and
gross profit was $107-million (2004 - $71-million).

(2) International potash sales were 428,000 tonnes (2004 - 357,000);
net sales were $54-million (2004 - $30-million) and gross profit
was $36-million (2004 - $16-million).

(3) International Retail net sales were $41-million (2004 -
$39-million) and gross profit was $7-million (2004 - $9-million).


Contact Information

  • Agrium Inc.
    Richard Downey
    Director, Investor Relations
    (403) 225-7357
    or
    Agrium Inc.
    Christine Gillespie
    Investor Relations Manager
    (403) 225-7437
    Website: www.agrium.com