Agrium Inc.
TSX : AGU
NYSE : AGU

Agrium Inc.

February 08, 2012 07:15 ET

Agrium Reports Record Fourth Quarter and Annual Results

CALGARY, ALBERTA--(Marketwire - Feb. 8, 2012) -

ALL AMOUNTS ARE STATED IN U.S.$

Agrium Inc. (TSX:AGU) (NYSE:AGU) announced today consolidated net earnings ("net earnings") from continuing operations of $327-million ($2.04 diluted earnings per share) for the fourth quarter of 2011. The 2011 fourth quarter results included a $61-million ($0.30 diluted earnings per share1) charge resulting from the impairment of Agrium's investment in Hanfeng Evergreen Inc. ("Hanfeng"). Excluding this charge, net earnings from continuing operations would have been $374-million ($2.34 diluted earnings per share). Net earnings were $193-million ($1.20 diluted earnings per share) for the fourth quarter of 2011, compared with the net earnings of $135-million in the fourth quarter of 2010 ($0.86 diluted earnings per share).

On an annual basis, 2011 net earnings from continuing operations were $1.5-billion ($9.52 diluted earnings per share), compared to $730-million ($4.62 diluted earnings per share) in 2010. 2011 net earnings were $1.4-billion ($8.68 diluted earnings per share) as compared to $713-million ($4.51 diluted earnings per share) in 2010.

"I am very pleased to report that Agrium delivered record results for both the fourth quarter and the year. Our earnings from continuing operations were more than double last year's level and we generated over $1 billion in cash this quarter. These impressive results were achieved despite global economic uncertainties that impacted commodity prices and led to buyer uncertainty in the later part of the year. We believe that the underlying fundamentals for the agriculture sector remain strong as crop inventory levels for most crops remain well below normal levels and in some cases are critically low," said Mike Wilson, Agrium President and CEO.

"As the spring planting season approaches, farmers have a strong incentive to plant record acreage and optimize the use of Agrium's full array of crop input products and services to maximize crop production. Agrium is well positioned to continue to meet farmers' needs in 2012 and looks forward to delivering another year of value for its stakeholders," added Mr. Wilson.

Losses recorded from discontinued operations of $134-million in the 2011 fourth quarter included an inventory write-off of $85-million ($0.54 diluted earnings per share) related to an insurance claim currently in dispute regarding misappropriated soybean inventory associated with AWB's Commodity Management business and a charge of $37-million ($0.23 diluted earnings per share) arising from the net impact of guarantees for letters of credit in AWB's investment in Hi-Fert Pty. Ltd. ("Hi-Fert"). We are aggressively pursuing claims against both of these losses and future recoveries will be recorded when assessed as virtually certain.

1Fourth quarter effective tax rate of 23 percent used for adjusted diluted earnings per share calculations.

2011 Fourth Quarter Operating Results

Unless otherwise indicated, the financial information presented and discussed in this press release is prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), and all comparisons of results for the fourth quarter of 2011 (three months ended December 31, 2011) are against results for the fourth quarter of 2010 (three months ended December 31, 2010) and all comparisons of results for 2011 are against results for 2010. All dollar amounts refer to United States ("U.S.") dollars except where otherwise stated.

CONSOLIDATED NET EARNINGS

Agrium's 2011 fourth quarter net earnings were $193-million, or $1.20 diluted earnings per share, compared to net earnings of $135-million, or $0.86 diluted earnings per share, for the same quarter of 2010.

Financial Overview

Three months ended
December 31,
(Millions of U.S. dollars, except per share amounts and effective tax rate) 2011 2010 $ Change % Change
Sales 3,177 2,398 779 32 %
Gross profit 1,045 725 320 44 %
Expenses 577 477 100 21 %
Earnings from continuing operations before finance costs and income taxes ("EBIT") 468 248 220 89 %
Consolidated net earnings from continuing operations(1) 327 152 175 115 %
Consolidated net earnings 193 135 58 43 %
Diluted earnings per share from continuing operations 2.04 0.97 1.07 110 %
Diluted earnings per share 1.20 0.86 0.34 40 %
Effective tax rate 23 % 29 % N/A (6 %)
(1) See "Discontinued Operations" below for a discussion of our discontinued operations.

Our consolidated gross profit for the fourth quarter of 2011 increased by $320-million, primarily due to higher gross profit from all three of our strategic business units, with highlights as follows:

  • An increase in Wholesale's gross profit of $216-million for the fourth quarter of 2011, as higher crop pricing drove up demand and selling prices for all major products; and
  • The addition of the Landmark Australia Retail operations accounted for an increase of $80-million in Retail's gross profit for the fourth quarter of 2011, with over half of the contribution coming from merchandise and other services. Excluding Landmark, Retail's gross profit increased by $21-million in the fourth quarter of 2011 due to higher selling prices and strong margins across our major product lines.

The $100-million increase in expenses for the fourth quarter of 2011 was primarily driven by:

  • Higher Retail selling expenses of $65-million due to the addition of the Landmark business in December of 2010;
  • Increased Retail payroll of $18-million due to other recent acquisitions ($6-million) and higher incentives on existing operations ($11-million); and
  • An impairment charge of $61-million regarding our investment in Hanfeng.

These increases were partially offset by a $7-million recovery in share-based payments expense in the fourth quarter, which is a $61-million favorable change from the same period in 2010 (see section "Other" for further discussion).

Below is a summary of our other (income) expenses for the fourth quarter of 2011 and 2010:

Three months ended December 31,
(Millions of U.S. dollars) 2011 2010
Interest income (21 ) (14 )
Bad debt (recovery) expense (7 ) 3
Other (6 ) 11
Foreign currency translation gain (1 ) (50 )
AWB acquisition costs - 37
Unrealized loss on derivative financial instruments 1 26
Realized loss on derivative financial instruments 7 5
Environmental remediation and asset retirement obligations 15 5
Potash profit and capital tax 17 16
Asset impairment 61 -
66 39

The effective tax rate was 23 percent for the fourth quarter of 2011 compared to 29 percent for the same period last year. The decrease in the effective tax rate compared to last year was primarily due to a one-time negative impact in 2010 of the cumulative effect of Canadian Tax Legislative changes relating to certain share based payment programs.

Financial Overview

BUSINESS SEGMENT PERFORMANCE

Retail

Retail's 2011 fourth quarter sales were $1.8-billion, a substantial increase over the $1.3-billion in sales for the fourth quarter of 2010. The increase was a result of the addition of the Landmark business, strong price appreciation for nutrients, and increased demand for other crop input products and services this fall season across all our retail operations. Gross profit was a record $452-million this quarter, a 29 percent increase over the $351-million earned in the fourth quarter of 2010. We achieved an EBIT of $37-million in the fourth quarter of 2011, down from the record EBIT of $46-million in the same quarter of 2010. Retail earnings from continuing operations before finance costs, income taxes, depreciation, amortization, and asset impairment ("EBITDA") reached $769-million in 2011, up significantly from the $524-million achieved last year and about three-quarters of the way to our $1-billion target by end of 2015.1

Crop nutrient sales reached $1.0-billion this quarter, compared to $827-million in the same quarter last year. The 25 percent increase in sales was due to significantly higher nutrient prices and the addition of the Landmark business. This was partially offset by lower North American sales volumes, which were down 9 percent compared to the previous year, due to the longer fall application season last year compared to this year. Agrium expects strong nutrient demand in the front half of 2012 supported by the continued strength in crop prices.1 Gross profit for crop nutrients was $142-million this quarter, up from $140-million in the fourth quarter of 2010. Total crop nutrient margins were 14 percent in the fourth quarter of 2011, down 3 percent from the same quarter last year due primarily to high prices and costs.

1See disclosure in the section "Outlook, Key Risks and Uncertainties" in this press release.

Crop protection sales were $403-million in the fourth quarter of 2011, a 38 percent increase over the $292-million in sales for the same period last year. This was due to primarily the addition of the Australian Landmark business and higher sales across several product lines in North America. Our private label Loveland chemistry sales were 19 percent higher than the same quarter last year. Total crop protection gross profit this quarter was $145-million, a 23 percent increase over the $118-million recorded in the fourth quarter of 2010 due to the inclusion of the Landmark business and higher volumes domestically. Crop protection product margins as a percentage of sales were 36 percent for the fourth quarter of 2011, down 5 percent from the fourth quarter of 2010 due to lower margins on Landmark's products. However, margins in our North and South American operations were approximately the same as the fourth quarter of last year.

Our seed sales reached $83-million this quarter compared to $54-million in the fourth quarter of 2010. Gross profit increased to $33-million this quarter, compared to the $26-million for the fourth quarter of 2010. Higher sales and gross profit this quarter was supported by a doubling in sales of our private label Dynagro seed business over the same period last year and higher winter wheat acreage.

Services and other sales were $176-million this quarter, over two and a half times higher than the $68-million reported in the fourth quarter of 2010. Gross profit was $106-million in the fourth quarter of 2011, compared to $59-million for the same period last year. The sizeable increase in sales and gross profit this quarter was due to the addition of the Australian Landmark business, whose services consist primarily of livestock and wool brokerage, and a strong application season in most regions. North American services and other achieved increased sales and gross profit compared to the same period last year, even though nutrient sales volumes were lower than the previous year.

Sales of merchandise this quarter were $143-million, compared to sales of $85-million in the fourth quarter of 2010. Gross profit for this product line was $26-million, compared to $8-million in the fourth quarter of 2010. The increase in sales and gross profit was due to the inclusion of the Landmark retail business for the full quarter in 2011 results.

Retail selling expenses for the fourth quarter of 2011 were $397-million, up $104-million from last year. The increase was due to a combination of increased operating expenses associated with the Landmark operations and higher fuel and incentive costs within our North American operations. Selling expenses as a percentage of sales were 22 percent in the fourth quarter of 2011, similar to the same period last year.

Wholesale

Wholesale's sales were a record $1.5-billion in the fourth quarter of 2011, compared to sales of $1.2-billion reported in the fourth quarter of 2010. Gross profit reached $556-million in the fourth quarter of 2011, which was also a fourth quarter record and 64% higher than the $340-million achieved in the same period in 2010. Wholesale reported fourth quarter EBIT of $507-million in 2011, significantly surpassing the previous fourth quarter record of $315-million earned in 2010. The record earnings achieved this quarter were attributable to higher realized prices and margins across all three major crop nutrients and strong sales volumes despite the global economic uncertainty experienced during the quarter.

Nitrogen gross profit was $322-million in the fourth quarter of 2011, more than double the $160-million reported in the same period last year due to higher realized prices and sales volumes. Both benchmark and Agrium's realized prices were higher for all nitrogen products in the fourth quarter of 2011 compared to the same period last year. Wholesale nitrogen sales volumes were higher than the same period last year, primarily due to higher North American and international sales volumes for ammonia and urea, which more than offset lower sales volumes for nitrogen solutions. Nitrogen cost of product sold was $258 per tonne this quarter, higher than the $243 per tonne reported in the fourth quarter of 2010, due primarily to higher input costs associated with production at nitrogen upgrade facilities and increased maintenance costs. Nitrogen margins were a fourth quarter record $304 per tonne this quarter, compared with $163 per tonne in the same period last year. The Egyptian MOPCO nitrogen facility, in which we have a 26 percent equity investment, continues to be shut in. However, we are optimistic the facility will be allowed to re-open in 2012 given its strong environmental performance, as recently reconfirmed by a government appointed independent Egyptian scientific review panel, as well as the positive contribution it can provide the Egyptian economy.

Agrium's average natural gas cost in cost of product sold was $3.47/MMBtu ($3.77/MMBtu including the impact of realized losses on natural gas derivatives) this quarter, compared to $3.70/MMBtu for the same period in 2010 ($3.97/MMBtu including the impact of realized losses on natural gas derivatives). Hedging gains or losses on all gas derivatives are not taken into account for the calculation of gross profit and are included in other expenses and therefore not included in cost of product sold. The U.S. benchmark (NYMEX) natural gas price for the fourth quarter of 2011 was $3.61/MMBtu, compared to $3.81/MMBtu in the same quarter last year and $4.19/MMBtu in the third quarter of 2011. The AECO (Alberta) basis differential was a $0.24/MMBtu discount to NYMEX in the fourth quarter of 2011, which was slightly lower than the $0.28/MMBtu differential that existed in the fourth quarter of 2010.

Potash gross profit for the fourth quarter of 2011 was $121-million, a 26 percent increase from the $96-million achieved in the same quarter last year. The increase was attributable to stronger domestic and international year-over-year pricing. International sales volumes were 221,000 tonnes this quarter, compared to 181,000 tonnes reported in the fourth quarter of 2010, as a result of increased deliveries against key Canpotex contracts. Domestic sales volumes were 177,000 tonnes this quarter, down from the 236,000 tonnes in the fourth quarter of 2010, due to a combination of lower post season fill demand by North American retailers and lower beginning inventory levels in the fourth quarter of 2011 compared to the same period last year. Potash cost of product sold was $169 per tonne this quarter, compared to $150 per tonne in the fourth quarter of 2010, as a result of unplanned plant maintenance costs. Gross margin on a per tonne basis was $304 in the fourth quarter of 2011, compared to the $228 per tonne realized during the same quarter in 2010.

Phosphate gross profit was $89-million in the fourth quarter of 2011, an increase of 65% from the $54-million reported in the same period last year. This substantial increase was attributable to higher production and an increase in realized sales prices, resulting from strong demand in Western Canada and the Northern Plains. Realized sales prices averaged $813 per tonne this quarter, up from $672 per tonne in the fourth quarter of 2010. Phosphate cost of product sold was $500 per tonne in the fourth quarter of 2011, compared to $454 per tonne in the same period last year, primarily due to higher sulfur costs. On a per tonne basis, gross margin in the fourth quarter of 2011 increased significantly to $313 per tonne, compared to $218 per tonne in the same period last year.

Gross profit from product purchased for resale was $1-million this quarter, down from $23-million in the fourth quarter of 2010. The decrease was a result of the significant decline in global crop nutrient prices experienced in the fourth quarter of 2011, which impacted both sales margins and the valuation on inventories, particularly in comparison to the buoyant market conditions that prevailed in the same quarter of last year.

Wholesale's Other product category, which is primarily comprised of ammonium sulfate and Rainbow granulated products, achieved gross profit of $23-million in the fourth quarter of 2011, compared to $7-million in the same period last year. The increase in gross profit this quarter was mainly due to higher realized prices for both product categories, which was partially offset by lower sales volumes from Rainbow products.

Wholesale expenses in the fourth quarter of 2011 were $49-million, $24-million higher than same period in 2010. The increase was due primarily to mark-to-market losses on natural gas and other derivatives (including foreign exchange) of $17-million.

Advanced Technologies

Advanced Technologies' ("AAT") gross profit was $38-million in the fourth quarter of 2011, significantly higher than the $24-million reported in the fourth quarter of 2010. The increase was attributable to higher realized sales prices and strong demand for Environmentally Smart Nitrogen ("ESN"), as well as contributions to gross profit from recent acquisitions.

EBIT was a loss of $56-million in the fourth quarter of 2011, a decrease of $58-million compared to the same period last year due to a $61-million impairment of Agrium's investment in Hanfeng. Agrium has determined that Hanfeng is not integral to our strategic growth plans in China and accordingly, we have recorded an impairment of $61-million, reducing our investment to $29-million to reflect Hanfeng's recent performance. Agrium plans on maintaining its equity investment in Hanfeng. Excluding the asset impairment, EBITDA was $12-million this quarter, which exceeded the $7-million reported in the fourth quarter of 2010. Stronger sales and gross profit were partly offset by higher selling and general and administrative costs in the fourth quarter of 2011, as compared to the same period last year. Selling and general and administrative costs for AAT were $11-million higher this quarter versus the same period in 2010, due primarily to acquisitions and continued efforts to support the expansion of AAT's retail sales footprint and presence in turf and ornamental markets in the U.S.

Other

EBIT for our Other non-operating business unit for the fourth quarter of 2011 was a loss of $20-million, compared to a loss of $115-million for the fourth quarter of 2010. This change was primarily driven by:

  • A $61-million favorable change in share-based payments expense, where there was a $7-million recovery during the fourth quarter of 2011, compared to an expense of $54-million during the fourth quarter of 2010; and
  • A $37-million expense in 2010 for AWB acquisition costs.

LIQUIDITY AND CAPITAL RESOURCES

Debt Ratings

On November 28, 2011, DBRS Limited affirmed its BBB long-term corporate credit rating and stable outlook on Agrium.

On September 21, 2011, Moody's Investors Service affirmed its Baa2 long-term corporate credit rating and stable outlook on Agrium.

On August 23, 2011, Standard & Poor's Rating Services affirmed its BBB long-term corporate credit rating and stable outlook on Agrium.

OUTSTANDING SHARE DATA

The number of Agrium's outstanding shares as at January 31, 2012 was approximately 158 million. As at January 31, 2012, the number of shares issuable pursuant to stock options outstanding (issuable assuming full conversion, where each option granted can be exercised for one common share) was approximately 0.3 million.

SELECTED QUARTERLY INFORMATION

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

2011 2010
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Sales 3,177 3,141 6,198 2,954 2,398 2,066 4,431 1,848
Gross profit 1,045 888 1,675 725 725 498 1,063 362
Consolidated net earnings (loss) from continuing operations 327 293 728 160 152 61 518 (1 )
Consolidated net earnings (loss) 193 293 718 171 135 61 518 (1 )
Earnings (loss) per share from continuing operations
-basic 2.05 1.86 4.61 1.02 0.97 0.39 3.29 (0.01 )
-diluted 2.04 1.85 4.60 1.02 0.97 0.39 3.28 (0.01 )
Earnings (loss) per share
-basic 1.20 1.86 4.55 1.09 0.86 0.39 3.29 (0.01 )
-diluted 1.20 1.85 4.54 1.09 0.86 0.39 3.28 (0.01 )

The agricultural products business is seasonal in nature. Consequently, sales and comparisons made on a year-over-year basis are more appropriate than quarter-over-quarter. Crop input sales are primarily concentrated in the spring and fall crop input application seasons, which are in the second quarter and fourth quarter. Crop nutrient inventories are normally accumulated leading up to the application season. Cash collections generally occur after the application season is complete in the Americas and Australia. Our acquisition of AWB in December 2010, which has a majority of its earnings from the first and second quarters of the calendar year, may have some impact on comparability.

BUSINESS ACQUISITIONS

On December 3, 2010, we acquired 100 percent of AWB, an agribusiness operating in Australia, for $1.2-billion in cash and $37-million of acquisition costs. On May 11, 2011, we completed the sale of the majority of the Commodity Management businesses acquired from AWB, in accordance with an agreement dated December 15, 2010 (for further discussion, see section "Discontinued Operations"). Cash received from the sale was $694-million.

We retained the Landmark retail operations, including over 200 company-owned retail locations and over 140 retail franchise and wholesale customer locations in Australia. The primary purpose of the acquisition was to expand the retail division and provide access to the growing Southeast Asia market. The acquired business is included in the Retail operating segment.

Other acquisitions

Consideration
Date (millions of U.S. dollars) Purchase type Business unit Description
Cerealtoscana S.p.A and Agroport May 2, 2011 27 100% of shares Wholesale Crop input distribution
Evergro Canada July 4, 2011 52 Certain assets and liabilities AAT Crop input manufacturing and distribution
International Mineral Technologies July 7, 2011 44 Certain assets and liabilities AAT / Retail Crop input manufacturing and distribution

DISCONTINUED OPERATIONS

Discontinued operations include the operations of the Commodity Management businesses and AWB Harvest Finance Limited, sold on May 11, 2011. Cash received from the sale was $694-million. We have agreed to various terms and conditions and indemnifications pursuant to the sale of the Commodity Management business, including an indemnity by AWB for litigation related to the Oil-for-Food Programme. Also included are the operations and assets and liabilities of the Commodity Management businesses not included in the sale.

Net loss from discontinued operations was $134-million for the fourth quarter of 2011 compared to $17-million in the same period of 2010. This was attributed to:

  • An inventory write-off of $85-million relating to misappropriated soybean inventory acquired in the purchase of AWB. The insurance claim is currently in dispute with insurers and future recoveries will be recorded when assessed as virtually certain.
  • In the fourth quarter, we paid approximately $37-million (net of recoveries from certain assets) pursuant to guarantees related to Hi-Fert. We are in dispute regarding security interests that could offset some or all of the guarantees that were paid out. Future recoveries will be recorded when assessed as virtually certain.

NON-IFRS FINANCIAL MEASURES

In the discussion of our performance for the quarter, in addition to the primary measures of earnings and earnings per share reported in accordance with IFRS, we make reference to EBITDA. We consider EBITDA to be a useful measure of performance because income tax jurisdictions and business segments are not synonymous and we believe that allocation of income tax charges distorts the comparability of historical performance for the different business segments. Similarly, financing and related interest charges cannot be allocated to all business units on a basis that is meaningful for comparison with other companies.

EBITDA is not a recognized measure under IFRS, and our method of calculation may not be comparable to other companies. Similarly, EBITDA should not be used as an alternative to net earnings from continuing operations as determined in accordance with IFRS.

The following table is a reconciliation of EBITDA to consolidated net earnings from continuing operations as determined in accordance with IFRS:

Three Months Ended December 31,
2011 2010
(millions of U.S. dollars)RetailWholesaleAdvanced Technologies Other Consolidated RetailWholesaleAdvanced TechnologiesOther Consolidated
EBITDA8055212 (15)629 793547(114)326
Depreciation and amortization43457 5 100 333951 78
Asset impairment--61 - 61 ---- -
EBIT37507(56)(20)468 463152(115)248
Finance costs related to long-term debt (25) (23)
Other finance costs (17) (11)
Income taxes (99) (62)
Consolidated net earnings from continuing operations 327 152

OUTLOOK, KEY RISKS AND UNCERTAINTIES

Global macroeconomic uncertainty created significant volatility in agricultural and crop nutrient markets in the fourth quarter. Major crop prices declined significantly between the beginning of November and the middle of December, driven in part by speculative traders significantly reducing their positions. The negative momentum in crop prices, combined with continued global economic uncertainty, led fertilizer buyers to delay making purchase decisions. In the absence of significant spot demand, nitrogen and phosphate prices declined in late 2011.

While the prospects for the global economy remain uncertain, the prospects for the agriculture sector are very positive. Corn prices remain at historically high levels, driven by a tight supply/demand balance in 2011/12. December corn futures averaged $5.69 per bushel in January 2012, similar to the strong prices experienced in January of 2011. Given the strength in corn prices most analysts expect higher corn acreage likely reaching between 92 and 94 million acres. Prospective 2012/13 cash margins for corn, soybean and cotton are all at historically high levels, which is expected to support strong demand for seed, crop protection products, crop nutrients and agronomic services.

Relatively quiet spot demand for nitrogen in late 2011 led to a significant decline in prices during the quarter. Prices have rebounded somewhat since the beginning of 2012, with renewed purchases from Pakistan and other markets. We expect pent up demand to continue to emerge in Europe and North America for application on winter wheat and due to expected strong corn area this spring. Brazil imported a record 3 million tonnes of urea in 2011 and demand is expected to be stronger than normal in the first half of 2012 due to a high sugarcane renewal rate and a large second crop of corn. We expect new exportable urea supplies to become available from Qatar in the first quarter of 2012 and from Algeria in the first half of 2012. China announced a slight change to its restrictive sliding scale export tax in late 2011. We do not expect the change to have a significant impact on Chinese urea exports, which declined by 50 percent in 2011 from 2010 levels. Chinese urea production costs have increased on rising anthracite coal and electricity costs and feedstock natural gas supply restrictions.

Slow spot demand for phosphates impacted markets in late 2011, but prices have since stabilized. India requested that suppliers delay shipments due to the combination of the decline in the value of the Indian Rupee and building port congestion and inventories. North American farm applications were strong in the fourth quarter, however dealers have been reluctant to re-fill inventories at this time, which should result in significant demand prior to planting the 2012 crop. Brazilian DAP/MAP imports were a record 2.6 million tonnes, up 67 percent from 2010 levels. While the first quarter of the year is seasonally a slow time for Brazilian imports, analysts expect Brazil to have another strong import year in 2012. The Ma'aden Phosphate project in Saudi Arabia is expected to continue to ramp up in the first half of 2012, with current production rates representing well below 50 percent capacity utilization. Similar to urea, the Chinese government changed its formula for the sliding scale export tax on DAP/MAP exports, which will reduce the tax paid relative to 2011. The Chinese Government implemented restrictions which will no longer allow TSP and NP fertilizers to be exported in record volumes as occurred in 2011. As a result of the change most analysts expect a significant decline in the export of these phosphate products and a slight reduction in total Chinese phosphate export levels, even though DAP/MAP exports may be somewhat higher in 2012.

Global potash import demand has been particularly slow in the fourth quarter of 2011 and early 2012. However 2011 was a record year in terms of global potash deliveries. Brazil imported a record volume of potash and became the largest importer of seaborne potash. China's imports rebounded to 6.4 million tonnes of potash, up 22 percent from 2010. Chinese imports in 2012 are more uncertain as domestic inventories of potash remain higher than they were a year ago. Similarly, Indian inventories are higher than normal for this time of year and they have delayed acceptance of a portion of contracted potash supplies. A number of potash producers have indicated they have lowered their operating rates given the recent slowdown in demand, however a seasonal pickup in demand is expected in the coming months given the continuation of strong crop prices.

Forward-Looking Statements

Certain statements and other information included in this press release 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 press release, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to, statements as to management's expectations with respect to: future crop and crop input volumes, demand, margins, prices and sales; business and financial prospects; and other plans, strategies, objectives and expectations, including with respect to future operations of Agrium. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements.

All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions listed below. Although Agrium believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The key assumptions that have been made in connection with the forward-looking statements include Agrium's ability to successfully integrate and realize the anticipated benefits of its acquisitions, including the acquisition of retained AWB businesses.

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 or government involvement in determining gas availability or prices or access to a facility or construction site, 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. Additionally, there are risks associated with Agrium's recent acquisition of AWB, including: size and timing of expected synergies could be less favourable than anticipated; AWB is subject to dispute and litigation risk (including as a result of being named in litigation commenced by the Iraqi Government relating to the United Nations Oil-For-Food Programme and post acquisition claims from the AWB acquisition and any ultimate recoveries arising from them are subject to the inherent risks of litigation as well as counterparty and sovereign risk). There are risks related to the recently announced potash expansion at Agrium's Vanscoy facility which include changes in development plans for the potash expansion, capital construction costs, construction progress, and potential delays in building the potash expansion and related infrastructure, availability of equipment and labor, performance of other parties and risks associated with technology; 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.

Agrium disclaims any intention or obligation to update or revise any forward-looking statements in this press release as a result of new information or future events, except as may be required under applicable U.S. federal securities laws or applicable Canadian securities legislation.

OTHER

Agrium Inc. is a major Retail supplier of agricultural products and services in North America, South America and Australia and a leading global Wholesale producer and marketer of all three major agricultural nutrients and the premier supplier of specialty fertilizers in North America through our Advanced Technologies business unit. Agrium's strategy is to grow across the value chain through acquisition, incremental expansion of its existing operations and through the development, commercialization and marketing of new products and international opportunities. Our strategy places particular emphasis on growth opportunities that both increase and stabilize our earnings profile in the continuing transformation of Agrium.

A WEBSITE SIMULCAST of the 2012 4th Quarter Conference Call will be available in a listen-only mode beginning Wednesday, February 8, 2012 at 9:30 a.m. MT (11:30 a.m. ET). Please visit the following website: www.agrium.com.

AGRIUM INC.
Consolidated Statements of Operations
(Millions of U.S. dollars, except per share amounts)
(Unaudited)
Three months ended Twelve months ended
December 31 , December 31 ,
2011 2010 2011 2010
Sales 3,177 2,398 15,470 10,743
Cost of product sold 2,132 1,673 11,137 8,095
Gross profit 1,045 725 4,333 2,648
Expenses
Selling 423 303 1,673 1,144
General and administrative 94 142 335 368
Earnings from associates (6 ) (7 ) (21 ) (26 )
Other expenses 66 39 123 49
Earnings before finance costs and income taxes 468 248 2,223 1,113
Finance costs related to long-term debt 25 23 101 88
Other finance costs 17 11 59 31
Earnings before income taxes 426 214 2,063 994
Income taxes 99 62 555 264
Consolidated net earnings from continuing operations 327 152 1,508 730
Consolidated net loss from discontinued operations (134 ) (17 ) (133 ) (17 )
Consolidated net earnings 193 135 1,375 713
Attributable to:
Equity holders of Agrium 189 136 1,371 713
Non-controlling interest 4 (1 ) 4 -
Consolidated net earnings 193 135 1,375 713
Earnings per share
Basic earnings per share from continuing operations 2.05 0.97 9.53 4.63
Basic loss per share from discontinued operations (0.85 ) (0.11 ) (0.84 ) (0.11 )
Basic earnings per share 1.20 0.86 8.69 4.52
Diluted earnings per share from continuing operations 2.04 0.97 9.52 4.62
Diluted loss per share from discontinued operations (0.84 ) (0.11 ) (0.84 ) (0.11 )
Diluted earnings per share 1.20 0.86 8.68 4.51
AGRIUM INC.
Consolidated Statements of Comprehensive Income
(Millions of U.S. dollars)
(Unaudited)
Three months ended Twelve months ended
December 31 , December 31 ,
2011 2010 2011 2010
Consolidated net earnings 193 135 1,375 713
Other comprehensive income (loss)
Gains (losses)
Available for sale financial instruments - - 1 -
Actuarial loss on post-employment benefit plans (32 ) (22 ) (58 ) (22 )
Foreign currency translation 78 72 (43 ) 66
46 50 (100 ) 44
Reclassification adjustments
Available for sale financial instruments - - (2 ) (48 )
Foreign currency translation - - (23 ) -
- - (25 ) (48 )
Deferred income taxes
Available for sale financial instruments - - - 19
Actuarial loss on post-employment benefit plans 10 6 17 6
10 6 17 25
56 56 (108 ) 21
Consolidated comprehensive income 249 191 1,267 734
Attributable to:
Equity holders of Agrium 246 183 1,271 737
Non-controlling interest 3 8 (4 ) (3 )
Consolidated comprehensive income 249 191 1,267 734
AGRIUM INC.
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
(Unaudited)
Three months ended Twelve months ended
December 31 , December 31 ,
2011 2010 2011 2010
Operating
Consolidated net earnings from continuing operations 327 152 1,508 730
Items not affecting cash
Depreciation and amortization 100 78 381 334
Earnings from associates (6 ) (7 ) (21 ) (26 )
Asset impairment 61 - 61 -
Share-based payments (7 ) 54 (51 ) 111
Unrealized loss (gain) on derivative financial instruments 1 26 (46 ) 42
Gain on disposal of marketable securities - - - (52 )
Unrealized foreign currency translation loss (gain) 8 (11 ) 19 (12 )
Deferred income taxes 53 1 150 13
Other 21 9 64 31
Dividends from associates - - 16 14
Net changes in non-cash working capital 543 273 (731 ) (596 )
Cash provided by operating activities 1,101 575 1,350 589
Investing
Acquisitions, net of cash acquired (38 ) (1,209 ) (183 ) (1,209 )
Proceeds from disposal of discontinued operations - - 721 -
Capital expenditures (233 ) (135 ) (663 ) (441 )
Investment in associates - - (15 ) -
Purchase of investments (3 ) - (46 ) -
Proceeds from disposal of investments - - 36 25
Proceeds from disposal of marketable securities - - - 117
Other 4 8 (1 ) -
Cash used in investing activities (270 ) (1,336 ) (151 ) (1,508 )
Financing
Short-term debt (161 ) (50 ) (293 ) 42
Long-term debt issued 1 517 71 565
Transaction costs on long-term debt - (13 ) - (13 )
Repayment of long-term debt (54 ) (7 ) (188 ) (17 )
Dividends paid - - (18 ) (17 )
Shares issued, net of issuance costs - 3 5 8
Cash (used in) provided by financing activities (214 ) 450 (423 ) 568
Effect of exchange rate changes on cash and cash equivalents (5 ) 4 (14 ) 8
Increase (decrease) in cash and cash equivalents from
continuing operations 612 (307 ) 762 (343 )
Cash and cash equivalents (used in) provided by discontinued
operations (21 ) 45 (51 ) 45
Cash and cash equivalents - beginning of period 755 897 635 933
Cash and cash equivalents - end of period 1,346 635 1,346 635
Included in operating activities
Interest paid 23 13 137 101
Interest received 20 14 78 50
Income taxes paid 138 57 401 508
Included in investing activities
Interest paid 3 2 10 4
AGRIUM INC.
Consolidated Balance Sheets
(Millions of U.S. dollars)
(Unaudited)
December 31, January 1 ,
2011 2010 (a ) 2010
ASSETS
Current assets
Cash and cash equivalents 1,346 635 933
Accounts receivable 1,984 1,759 1,133
Income taxes receivable 138 25 114
Inventories 2,956 2,498 2,137
Prepaid expenses and deposits 643 848 567
Marketable securities - 3 114
Assets of discontinued operations 68 1,320 -
7,135 7,088 4,998
Property, plant and equipment 2,533 2,179 1,797
Intangibles 678 695 617
Goodwill 2,277 2,271 1,804
Investments in associates 355 405 370
Other assets 97 48 88
Deferred income tax assets 63 22 -
Assets of discontinued operations 2 184 -
13,140 12,892 9,674
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt 245 517 106
Accounts payable 2,959 2,815 2,094
Income taxes payable 82 12 349
Current portion of long-term debt 20 125 -
Current portion of other provisions 68 44 47
Liabilities of discontinued operations 53 1,020 -
3,427 4,533 2,596
Long-term debt 2,098 2,118 1,699
Provisions for post-employment benefits 192 136 106
Other provisions 299 296 260
Other liabilities 59 123 82
Deferred income tax liabilities 637 490 460
Liabilities of discontinued operations - 3 -
6,712 7,699 5,203
Shareholders' equity
Share capital 1,994 1,982 1,977
Retained earnings 4,477 3,150 2,454
Accumulated other comprehensive (loss) income (47 ) 53 29
Equity holders of Agrium 6,424 5,185 4,460
Non-controlling interest 4 8 11
Total equity 6,428 5,193 4,471
13,140 12,892 9,674
(a) Certain amounts have been restated to reflect adjustments from the finalization of the AWB Limited acquisition.
AGRIUM INC.
Consolidated Statements of Shareholders' Equity
(Millions of U.S. dollars, except share data)
(Unaudited)

Millions
of
common
shares (a
)


Share
capital



Retained
earnings

Accumulated
other
comprehensive
income (loss
)

Equity
holders of
Agrium


Non-
controlling
interest



Total
equity
January 1, 2010 157 1,977 2,454 29 4,460 11 4,471
Consolidated net earnings - - 713 - 713 - 713
Other comprehensive income (loss), net of tax
Available for sale financial instruments - - - (29 ) (29 ) - (29 )
Actuarial loss on post-employment benefit plans
-

-

-

(16
)
(16
)
-

(16
)
Foreign currency translation - - - 69 69 (3 ) 66
Comprehensive income (loss), net of tax - - 713 24 737 (3 ) 734
Dividends ($0.11 per share) - - (17 ) - (17 ) - (17 )
Share-based payment transactions 1 5 - - 5 - 5
December 31, 2010 158 1,982 3,150 53 5,185 8 5,193
Consolidated net earnings - - 1,371 - 1,371 4 1,375
Other comprehensive income (loss), net of tax
Available for sale financial instruments - - - (1 ) (1 ) - (1 )
Actuarial loss on post-employment benefit plans
-

-

-

(41
)
(41
)
-

(41
)
Foreign currency translation - - - (58 ) (58 ) (8 ) (66 )
Comprehensive income (loss), net of tax - - 1,371 (100 ) 1,271 (4 ) 1,267
Dividends ($0.28 per share) (b) - - (44 ) - (44 ) - (44 )
Share-based payment transactions - 12 - - 12 - 12
December 31, 2011 158 1,994 4,477 (47 ) 6,424 4 6,428
(a) Authorized share capital consists of unlimited common shares without par value.
(b) Dividends of $0.225 per share were paid January 19, 2012 to shareholders of record on January 1, 2012.
AGRIUM INC.
Results by Segment
(Unaudited - millions of U.S. dollars)
Schedule 1a
Three months ended December 31,
2011
Advanced
Retail Wholesale Technologies Other Total
Sales - external 1,827 1,226 124 - 3,177
- inter-segment 8 228 22 (258 ) -
Total sales 1,835 1,454 146 (258 ) 3,177
Cost of product sold 1,383 898 108 (257 ) 2,132
Gross profit 452 556 38 (1 ) 1,045
Gross profit (%) 25 38 26 33
Selling expenses 397 13 14 (1 ) 423
EBITDA(1) 80 552 12 (15 ) 629
EBIT(2) 37 507 (56 ) (20 ) 468
Three months ended December 31,
2010
Advanced
Retail Wholesale Technologies Other Total
Sales - external 1,309 1,006 83 - 2,398
- inter-segment 16 154 16 (186 ) -
Total sales 1,325 1,160 99 (186 ) 2,398
Cost of product sold 974 820 75 (196 ) 1,673
Gross profit 351 340 24 10 725
Gross profit (%) 26 29 24 30
Selling expenses 293 9 8 (7 ) 303
EBITDA(1) 79 354 7 (114 ) 326
EBIT(2) 46 315 2 (115 ) 248
(1) Earnings (loss) from continuing operations before finance costs, income taxes, depreciation, amortization and asset impairment.
(2) Earnings (loss) from continuing operations before finance costs and income taxes.
(3) All schedules have been restated to conform to International Financial Reporting Standards.
AGRIUM INC.
Results by Segment
(Unaudited - millions of U.S. dollars)
Schedule 1b
Twelve months ended December 31,
2011
Advanced
Retail Wholesale Technologies Other Total
Sales - external 10,287 4,759 424 - 15,470
- inter-segment 29 817 86 (932 ) -
Total sales 10,316 5,576 510 (932 ) 15,470
Cost of product sold 8,030 3,594 395 (882 ) 11,137
Gross profit 2,286 1,982 115 (50 ) 4,333
Gross profit (%) 22 36 23 28
Selling expenses 1,595 42 47 (11 ) 1,673
EBITDA(1) 769 2,019 34 (157 ) 2,665
EBIT(2) 600 1,846 (51 ) (172 ) 2,223
Twelve months ended December 31,
2010
Advanced
Retail Wholesale Technologies Other Total
Sales - external 6,941 3,460 342 - 10,743
- inter-segment 28 524 55 (607 ) -
Total sales 6,969 3,984 397 (607 ) 10,743
Cost of product sold 5,418 2,975 312 (610 ) 8,095
Gross profit 1,551 1,009 85 3 2,648
Gross profit (%) 22 25 21 25
Selling expenses 1,094 35 30 (15 ) 1,144
EBITDA(1) 524 1,081 31 (189 ) 1,447
EBIT(2) 409 889 12 (197 ) 1,113
(1) Earnings (loss) from continuing operations before finance costs, income taxes, depreciation, amortization and asset impairment.
(2) Earnings (loss) from continuing operations before finance costs and income taxes.
(3) All schedules have been restated to conform to International Financial Reporting Standards.
AGRIUM INC.
Product Lines
(Unaudited - millions of U.S. dollars)
Schedule 2
Three months ended December 31, Twelve months ended December 31,
2011 2010 2011 2010
Cost of Cost of Cost of Cost of
product Gross product Gross product Gross product Gross
Sales sold(1 ) profit Sales sold(1 ) profit Sales sold(1 ) profit Sales sold(1 ) profit
Retail(2)(3)
Crop nutrients 1,030 888 142 827 687 140 4,537 3,779 758 3,001 2,460 541
Crop protection products 403 258 145 291 173 118 3,449 2,651 798 2,703 2,070 633
Seed 83 50 33 54 28 26 1,085 855 230 877 706 171
Merchandise 143 117 26 85 77 8 629 540 89 158 144 14
Services and other 176 70 106 68 9 59 616 205 411 230 38 192
1,835 1,383 452 1,325 974 351 10,316 8,030 2,286 6,969 5,418 1,551
Wholesale(3)
Nitrogen 595 273 322 397 237 160 2,051 1,077 974 1,458 1,006 452
Potash 188 67 121 158 62 96 809 296 513 675 304 371
Phosphate 232 143 89 165 111 54 893 544 349 596 490 106
Product purchased for resale 371 370 1 388 365 23 1,566 1,506 60 1,039 991 48
Other 68 45 23 52 45 7 257 171 86 216 184 32
1,454 898 556 1,160 820 340 5,576 3,594 1,982 3,984 2,975 1,009
Advanced Technologies(3)
Turf and ornamental 81 58 23 68 53 15 311 245 66 271 215 56
Agriculture 65 50 15 31 22 9 199 150 49 126 97 29
146 108 38 99 75 24 510 395 115 397 312 85
Other inter-segment eliminations(3) (258 ) (257 ) (1 ) (186 ) (196 ) 10 (932 ) (882 ) (50 ) (607 ) (610 ) 3
Total(3) 3,177 2,132 1,045 2,398 1,673 725 15,470 11,137 4,333 10,743 8,095 2,648
(1) Includes depreciation and amortization.
(2) International Retail net sales were $582-million (2010 - $243-million) and gross profit was $134-million (2010 - $51-million) for the three months ended December 31. International Retail net sales were $2.6-billion (2010 - $435-million) and gross profit was $504-million (2010 - $85-million) for the twelve months ended December 31.
(3) Comparative figures have been reclassified to conform to the current year's revised categories.
AGRIUM INC.
Selected Wholesale Volumes and Sales Prices
(Unaudited)
Schedule 3a
Three months ended December 31,
2011 2010
Cost of Cost of
Sales Selling product Sales Selling product
tonnes price sold Margin tonnes price sold Margin
(000's ) ($/tonne ) ($/tonne ) ($/tonne ) (000's ) ($/tonne ) ($/tonne ) ($/tonne )
Nitrogen
Domestic
Ammonia 377 638 314 466
Urea 340 600 318 420
Other 211 375 229 286
Total domestic 928 564 861 401
International 132 543 119 438
Total nitrogen 1,060 562 258 304 980 406 243 163
Potash
Domestic 177 581 236 444
International 221 386 181 292
Total potash 398 473 169 304 417 378 150 228
Phosphate 285 813 500 313 246 672 454 218
Product purchased for resale 721 514 513 1 944 410 385 25
Other
Ammonium sulfate 88 386 207 179 78 269 181 88
Other 74 84
Total other 162 162
Total Wholesale 2,626 554 342 212 2,749 422 298 124
AGRIUM INC.
Selected Wholesale Volumes and Sales Prices
(Unaudited)
Schedule 3b
Twelve months ended December 31,
2011 2010
Cost of Cost of
Sales Selling product Sales Selling product
tonnes price sold Margin tonnes price sold Margin
(000's ) ($/tonne ) ($/tonne ) ($/tonne ) (000's ) ($/tonne ) ($/tonne ) ($/tonne )
Nitrogen
Domestic
Ammonia 1,152 586 1,125 432
Urea 1,376 544 1,401 389
Other 1,022 367 952 267
Total domestic 3,550 506 3,478 371
International 509 500 440 386
Total nitrogen 4,059 506 266 240 3,918 372 257 115
Potash
Domestic 846 556 1,119 420
International 919 368 749 273
Total potash 1,765 458 168 290 1,868 361 163 198
Phosphate 1,127 792 482 310 1,041 573 471 102
Product purchased for resale 3,245 483 465 18 3,000 346 330 16
Other
Ammonium sulfate 358 366 195 171 347 256 180 76
Other 280 344
Total other 638 691
Total Wholesale 10,834 515 332 183 10,518 379 283 96
AGRIUM INC.
Depreciation and Amortization in Cost of Product Sold
(Unaudited - millions of U.S. dollars)
Schedule 4
Three months ended Twelve months ended
December 31 , December 31 ,
2011 2010 2011 2010
Retail 2 2 6 6
Wholesale
Nitrogen 21 20 81 77
Potash 9 6 38 36
Phosphate 12 10 46 68
Product purchased for resale - - - 1
Other 1 1 3 5
43 37 168 187
Advanced Technologies 3 2 13 12
Total 48 41 187 205

Contact Information

  • Agrium Inc.
    Richard Downey
    Vice President, Investor & Corporate Relations
    (403) 225-7357

    Agrium Inc.
    Todd Coakwell
    Manager, Investor Relations
    (403) 225-7437

    Agrium Inc.
    Mark Thompson
    Analyst, Investor Relations
    (403) 225-7761
    www.agrium.com