May 3, 2016 -- All Amounts Are Stated in U.S.$
CALGARY, AB--(Marketwired - May 03, 2016) - Agrium Inc. (TSX: AGU) (NYSE: AGU) announced today its 2016 first quarter earnings results, with net earnings attributable to equity holders of Agrium of $2-million ($0.02 diluted earnings per share) compared to $12-million ($0.08 diluted earnings per share) in the first quarter of 2015. The reduction in net earnings was driven by weaker selling prices across all nutrients. This was largely offset by excellent results achieved from our Retail operations and strong Wholesale operational performance.
Highlights:
"Agrium's first quarter results once again highlight the resilience of our business model," commented Chuck Magro, Agrium's President and CEO. "Our Retail business achieved impressive first quarter EBITDA, with strong margins across all major product lines. Our Wholesale business unit continued to demonstrate excellent operating performance and capitalized on our extensive competitive advantages," added Mr. Magro.
1 First quarter effective tax rate of 29 percent used for adjusted net earnings and per share calculations. These are non-IFRS measures which represent net earnings adjusted for certain income (expenses) that are considered to be non-operational in nature. We believe these measures provide meaningful comparison to the earnings of other companies by eliminating share-based payments expense (recovery), gains (losses) on foreign exchange and related gains (losses) on non-qualifying derivative hedges and significant non-operating, non-recurring items. These should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS and may not be directly comparable to similar measures presented by other companies.
2 Earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization.
ADJUSTED NET EARNINGS RECONCILIATION | |||||||
Three months ended | |||||||
March 31, 2016 | |||||||
Net earnings | |||||||
impact | |||||||
(millions of U.S. dollars, except per share amounts) | Expense | (post-tax) | Per share (a) | ||||
3 | 0.02 | ||||||
Adjustments: | |||||||
Share-based payments | 4 | 3 | 0.02 | ||||
Foreign exchange loss net of non-qualifying derivatives | 2 | 1 | 0.01 | ||||
Adjusted net earnings (b) | 7 | 0.05 |
(a) | This represents diluted per share information attributable to equity holders of Agrium. |
(b) | First quarter effective tax rate of 29 percent was used for the adjusted net earnings and per share calculations. |
MARKET OUTLOOK
Agricultural & Crop Input Markets
Nitrogen Outlook
Potash Outlook
Phosphate Outlook
2016 ANNUAL GUIDANCE
Based on our Market Outlook, Agrium expects to achieve annual diluted earnings per share of $5.25 to $6.25 in 2016 compared to our previous estimate of $5.50 to $7.00. We have lowered the guidance range due to a challenging pricing environment for all nutrients and expectations for a stronger Canadian dollar, partially offset by lower natural gas costs and continued strong performance by our Retail business. We are issuing earnings guidance of $4.00 to $4.30 diluted earnings per share for the first half of 2016.
We have reduced our estimate of potash production to 2.3 to 2.4 million tonnes.
Retail crop nutrient sales tonnes for 2016 are now expected to be from 9.8 million to 10.3 million tonnes. The slight widening of the range from our previous estimate is due to a forecasted increase in U.S. planted corn acres.
Our estimates for the Canada/U.S. foreign exchange rate and NYMEX for 2016 have been updated based on current market conditions.
This guidance and updated additional measures and related assumptions are summarized in the table below. Guidance excludes the impact of share-based payments expense (recovery), gains (losses) on foreign exchange and non-qualifying derivative hedges and significant non-operating, non-recurring items. Volumetric and earnings estimates assume normal seasonal growing and harvest patterns in the geographies where Agrium operates.
2016 ANNUAL GUIDANCE RANGE AND ASSUMPTIONS
Annual | ||||
Low | High | |||
Diluted EPS (in U.S. dollars) | $5.25 | $6.25 | ||
Guidance assumptions: | ||||
Wholesale: | ||||
Production tonnes: | ||||
Nitrogen (millions) | 3.5 | 3.7 | ||
Potash (millions) | 2.3 | 2.4 | ||
Retail: | ||||
EBITDA (millions of U.S. dollars) | $1,075 | $1,175 | ||
Crop nutrient sales tonnes (millions) | 9.8 | 10.3 | ||
Other: | ||||
Operational tax rate | 28% | 27% | ||
Sustaining capital expenditures (millions of U.S. dollars) | $500 | $550 | ||
Total capital expenditures (millions of U.S. dollars) | $800 | $900 | ||
Canada/U.S. foreign exchange rate | $1.31 | $1.36 | ||
NYMEX gas price ($/MMBtu) | $2.65 | $2.05 | ||
MANAGEMENT'S DISCUSSION AND ANALYSIS
May 3, 2016
Unless otherwise noted, all financial information in this Management's Discussion and Analysis (MD&A) is prepared using accounting policies in accordance with International Financial Reporting Standards (IFRS) and is presented in accordance with International Accounting Standard 34 - Interim Financial Reporting. All comparisons of results for the first quarter of 2016 (three months ended March 31, 2016) are against results for the first quarter of 2015 (three months ended March 31, 2015). All dollar amounts refer to United States (U.S.) dollars except where otherwise stated.
The following interim MD&A is as of May 3, 2016 and should be read in conjunction with the Consolidated Interim Financial Statements for the three months ended March 31, 2016 (the "Consolidated Financial Statements"), and the annual MD&A and financial statements for the year ended December 31, 2015 included in our 2015 Annual Report to Shareholders. The Board of Directors carries out its responsibility for review of this disclosure principally through its Audit Committee, comprised exclusively of independent directors. The Audit Committee reviews, and prior to publication, approves this disclosure, pursuant to the authority delegated to it by the Board of Directors. No update is provided to the disclosure in our annual MD&A except for material information since the date in our annual MD&A. In respect of Forward-Looking Statements, please refer to the section titled "Forward-Looking Statements" in this MD&A.
2016 First Quarter Operating Results | ||||||||||
CONSOLIDATED NET EARNINGS | ||||||||||
Financial Overview | ||||||||||
Three months ended March 31, | ||||||||||
(millions of U.S. dollars, except per share amounts and where noted) | 2016 | 2015 | Change | % Change | ||||||
Sales | 2,725 | 2,872 | (147 | ) | (5 | ) | ||||
Gross profit | 554 | 584 | (30 | ) | (5 | ) | ||||
Expenses | 479 | 509 | (30 | ) | (6 | ) | ||||
Earnings before finance costs and income taxes | 75 | 75 | - | - | ||||||
Net earnings | 3 | 14 | (11 | ) | (79 | ) | ||||
Diluted earnings per share | 0.02 | 0.08 | (0.06 | ) | (75 | ) | ||||
Effective tax rate (%) | 29 | 26 | N/A | N/A |
Sales and Gross Profit | ||||||||||
Three months ended March 31, | ||||||||||
(millions of U.S. dollars) | 2016 | 2015 | Change | |||||||
Sales | ||||||||||
Retail | 2,290 | 2,263 | 27 | |||||||
Wholesale | 649 | 867 | (218 | ) | ||||||
Other | (214 | ) | (258 | ) | 44 | |||||
2,725 | 2,872 | (147 | ) | |||||||
Gross profit | ||||||||||
Retail | 402 | 371 | 31 | |||||||
Wholesale | 153 | 234 | (81 | ) | ||||||
Other | (1 | ) | (21 | ) | 20 | |||||
554 | 584 | (30 | ) | |||||||
Expenses
Other expenses breakdown | ||||||
Three months ended March 31, | ||||||
(millions of U.S. dollars) | 2016 | 2015 | ||||
Loss (gain) on foreign exchange and related derivatives | 2 | (1 | ) | |||
Interest income | (13 | ) | (17 | ) | ||
Gain on sale of assets | - | (38 | ) | |||
Environmental remediation and asset retirement obligations | 2 | 9 | ||||
Bad debt expense | 8 | 7 | ||||
Potash profit and capital tax | 3 | 5 | ||||
Other | 9 | 2 | ||||
11 | (33 | ) | ||||
Depreciation and Amortization |
Three months ended March 31, | |||||||||||||||||
2016 | 2015 | ||||||||||||||||
Cost of | General | Cost of | General | ||||||||||||||
product | and | product | and | ||||||||||||||
(millions of U.S. dollars) | sold | Selling | administrative | Total | sold | Selling | administrative | Total | |||||||||
Retail | 2 | 63 | 2 | 67 | 1 | 54 | 2 | 57 | |||||||||
Wholesale | |||||||||||||||||
Nitrogen | 13 | - | - | 13 | 18 | - | - | 18 | |||||||||
Potash | 20 | - | - | 20 | 14 | - | - | 14 | |||||||||
Phosphate | 10 | - | - | 10 | 13 | - | - | 13 | |||||||||
Wholesale Other (a) | 1 | - | - | 1 | 5 | - | - | 5 | |||||||||
44 | - | - | 44 | 50 | - | - | 50 | ||||||||||
Other | - | - | 3 | 3 | - | - | 4 | 4 | |||||||||
Total | 46 | 63 | 5 | 114 | 51 | 54 | 6 | 111 |
(a) | This includes product purchased for resale, ammonium sulfate, Environmentally Smart Nitrogen® (ESN) and other products. |
Effective Tax Rate |
BUSINESS SEGMENT PERFORMANCE
Retail | ||||||||
Three months ended March 31, | ||||||||
(millions of U.S. dollars, except where noted) | 2016 | 2015 | Change | |||||
Sales | 2,290 | 2,263 | 27 | |||||
Cost of product sold | 1,888 | 1,892 | (4 | ) | ||||
Gross profit | 402 | 371 | 31 | |||||
EBITDA (a) | 44 | (8 | ) | 52 | ||||
Selling expense as a percentage of sales (%) | 18 | 19 | (1 | ) |
(a) | Earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization. |
Retail sales and gross profit by product line |
Three months ended March 31, | ||||||||||||||||||
Sales | Gross profit | Gross profit (%) | ||||||||||||||||
(millions of U.S. dollars, except where noted) | 2016 | 2015 | Change | 2016 | 2015 | Change | 2016 | 2015 | ||||||||||
Crop nutrients | 839 | 911 | (72 | ) | 134 | 126 | 8 | 16 | 14 | |||||||||
Crop protection products | 831 | 793 | 38 | 121 | 108 | 13 | 15 | 14 | ||||||||||
Seed | 376 | 308 | 68 | 51 | 40 | 11 | 14 | 13 | ||||||||||
Merchandise | 117 | 142 | (25 | ) | 19 | 20 | (1 | ) | 16 | 14 | ||||||||
Services and other | 127 | 109 | 18 | 77 | 77 | - | 61 | 71 | ||||||||||
Crop nutrients
Crop protection products
Seed
Merchandise
Services and other
Wholesale | |||||||
Three months ended March 31, | |||||||
(millions of U.S. dollars, except where noted) | 2016 | 2015 | Change | ||||
Sales | 649 | 867 | (218 | ) | |||
Sales volumes (tonnes 000's) | 1,926 | 2,034 | (108 | ) | |||
Cost of product sold | 496 | 633 | (137 | ) | |||
Gross profit | 153 | 234 | (81 | ) | |||
Expenses | 34 | 40 | (6 | ) | |||
Gain on sale of assets | - | 38 | (38 | ) | |||
Wholesale NPK product information | |||||||||||||||||||||
Three months ended March 31, | |||||||||||||||||||||
Nitrogen | Potash | Phosphate | |||||||||||||||||||
2016 | 2015 | Change | 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||
Gross profit (U.S. dollar millions) | 95 | 143 | (48 | ) | 14 | 7 | 7 | 20 | 45 | (25 | ) | ||||||||||
Sales volumes (tonnes 000's) | 741 | 761 | (20 | ) | 456 | 185 | 271 | 220 | 282 | (62 | ) | ||||||||||
Selling price ($/tonne) | 338 | 414 | (76 | ) | 199 | 361 | (162 | ) | 589 | 639 | (50 | ) | |||||||||
Cost of product sold ($/tonne) | 209 | 226 | (17 | ) | 168 | 324 | (156 | ) | 499 | 481 | 18 | ||||||||||
Gross margin ($/tonne) | 129 | 188 | (59 | ) | 31 | 37 | (6 | ) | 90 | 158 | (68 | ) | |||||||||
Nitrogen
Natural gas prices: North American indices and North American Agrium prices | ||||
Three months ended March 31, | ||||
(U.S. dollars per MMBtu) | 2016 | 2015 | ||
Overall gas cost excluding realized derivative impact | 1.61 | 2.52 | ||
Realized derivative impact | 0.33 | 0.41 | ||
Overall gas cost | 1.94 | 2.93 | ||
Average NYMEX | 2.05 | 2.96 | ||
Average AECO | 1.53 | 2.22 | ||
Potash
Phosphate
Wholesale Other
Wholesale Other: gross profit breakdown | |||||||
Three months ended March 31, | |||||||
(millions of U.S. dollars) | 2016 | 2015 | Change | ||||
Ammonium sulfate | 10 | 17 | (7 | ) | |||
ESN | 8 | 11 | (3 | ) | |||
Product purchased for resale | 5 | 7 | (2 | ) | |||
Other | 1 | 4 | (3 | ) | |||
24 | 39 | (15 | ) | ||||
Expenses
Other
EBITDA for our Other non-operating business unit for the first quarter of 2016 had a net expense of $18-million, compared to a net expense of $88-million for the first quarter of 2015. The variance was primarily due to the following:
FINANCIAL CONDITION
The following are changes to working capital on our Consolidated Balance Sheets for the three months ended March 31, 2016 compared to December 31, 2015.
(millions of U.S. dollars, except where noted) |
|
March 31, 2016 | December 31, 2015 | $ Change | % Change | Explanation of the change in balance | |||||||
Current assets | |||||||||||||
Cash and cash equivalents | 276 | 515 | (239 | ) | (46 | %) | See discussion under the section "Liquidity and Capital Resources". |
||||||
Accounts receivable | 2,200 | 2,053 | 147 | 7 | % | Increased Retail trade receivables consistent with the start of the spring season. | |||||||
Income taxes receivable | 61 | 4 | 57 | 1,425 | % | First quarter tax installments paid exceeded the first quarter tax provision. | |||||||
Inventories | 4,524 | 3,314 | 1,210 | 37 | % | Seasonal Retail inventory build-up in preparation for the spring season. |
|||||||
Prepaid expenses and deposits | 254 | 688 | (434 | ) | (63 | %) | Drawdown of prepaid inventory as Retail took delivery of product in anticipation of the spring season. | ||||||
Other current assets | 152 | 144 | 8 | 6 | % | - | |||||||
Current liabilities | |||||||||||||
Short-term debt | 629 | 835 | (206 | ) | (25 | %) | Decrease primarily due to seasonally lower working capital requirements, partially offset by increased financing for capital investments. | ||||||
Accounts payable | 5,309 | 3,919 | 1,390 | 35 | % | Retail inventory purchases and customer prepayments made in anticipation of the spring season. | |||||||
Income taxes payable | 1 | 82 | (81 | ) | (99 | %) | 2015 tax accrual was paid. | ||||||
Current portion of long-term debt | 108 | 8 | 100 | 1,250 | % | Increase relates to $100-million 7.7 percent debentures coming due in 2017. | |||||||
Current portion of other provisions | 81 | 85 | (4 | ) | (5 | %) | - | ||||||
Working capital | 1,339 | 1,789 | (450 | ) | (25 | %) | |||||||
LIQUIDITY AND CAPITAL RESOURCES
Agrium generally expects that it will be able to meet its working capital requirements, capital resource needs and shareholder returns through a variety of sources, including available cash on hand, cash provided by operations, short-term borrowings from the issuance of commercial paper, and borrowings from our credit facilities, as well as long-term debt and equity capacity from the capital markets.
As of March 31, 2016, we have sufficient current assets to meet our current liabilities.
Summary of Consolidated Statements of Cash Flows
Below is a summary of our cash provided by or used in operating, investing, and financing activities as reflected in the Consolidated Statements of Cash Flows:
Three months ended March 31, | |||||||||
(millions of U.S. dollars) | 2016 | 2015 | Change | ||||||
Cash provided by operating activities | 343 | 705 | (362 | ) | |||||
Cash used in investing activities | (277 | ) | (461 | ) | 184 | ||||
Cash used in financing activities | (325 | ) | (295 | ) | (30 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 20 | (17 | ) | 37 | |||||
Decrease in cash and cash equivalents | (239 | ) | (68 | ) | (171 | ) | |||
Cash provided by operating activities - drivers behind the $362-million decrease | |
Use of cash | • $159-million decrease in cash related to taxes is due to the 2015 final tax payments being higher than the 2014 final tax payments. • $47-million decrease in cash due to higher interest payments made in the first quarter of 2016 resulting from the timing of interest paid on debt issued during 2014 and 2015. |
Cash used in investing activities - drivers behind the $184-million decrease in use | |
Use of cash | • Lower capital expenditures than the first quarter of 2015 due to the ramp-up of our Vanscoy potash facility coupled with decreased spending for the Borger project. |
Cash used in financing activities - drivers behind the $30-million increase in use | |
Use of cash | • In 2015, we generated $1-billion of cash through long-term debt issuance and paid back $1.2-billion in short-term debt. In 2016, we paid $240-million in short-term debt. There was no debt issuance in 2016. |
Capital Spending and Expenditures (a) | |||||
Three months ended | |||||
March 31, | |||||
(millions of U.S. dollars) | 2016 | 2015 | |||
Retail | |||||
Sustaining | 47 | 54 | |||
Investing | 9 | 9 | |||
56 | 63 | ||||
Acquisitions(b) | 94 | 60 | |||
150 | 123 | ||||
Wholesale | |||||
Sustaining | 49 | 40 | |||
Investing | 68 | 295 | |||
117 | 335 | ||||
Other | |||||
Sustaining | 1 | 1 | |||
Total | |||||
Sustaining | 97 | 95 | |||
Investing | 77 | 304 | |||
174 | 399 | ||||
Acquisitions(b) | 94 | 60 | |||
268 | 459 |
(a) | This excludes capitalized borrowing costs. |
(b) | This represents business acquisitions and includes acquired working capital; property, plant and equipment; intangibles; goodwill; and investments in associates and joint ventures. |
Short-term Debt
Capital Management
SHARE REPURCHASES
We are allowed to purchase for cancellation, on the Toronto Stock Exchange (TSX) or New York Stock Exchange an aggregate of 6,908,450 common shares (5 percent) of our outstanding shares. Repurchases may be made under a Normal Course Issuer Bid (NCIB) approved by the TSX until February 18, 2017. The actual number of shares purchased will be at Agrium's discretion and will depend on market conditions, share prices, Agrium's cash position and other factors.
There were no shares repurchased for the three months ended March 31, 2016 or the period from April 1, 2016 to May 3, 2016.
Shareholders can obtain a copy of the NCIB notice submitted to the TSX from Agrium without charge upon request.
OUTSTANDING SHARE DATA
Agrium had 138,175,400 outstanding shares at April 29, 2016.
SELECTED QUARTERLY INFORMATION | ||||||||||||||||||||
(millions of U.S. dollars, | 2016 | 2015 | 2015 | 2015 | 2015 | 2014 | 2014 | 2014 | ||||||||||||
except per share amounts) | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | ||||||||||||
Sales | 2,725 | 2,407 | 2,524 | 6,992 | 2,872 | 2,705 | 2,920 | 7,338 | ||||||||||||
Gross profit | 554 | 900 | 696 | 1,708 | 584 | 732 | 665 | 1,599 | ||||||||||||
Net earnings from continuing operations | 3 | 200 | 99 | 675 | 14 | 70 | 91 | 625 | ||||||||||||
Net loss from discontinued operations | - | - | - | - | - | (19 | ) | (41 | ) | (9 | ) | |||||||||
Net earnings | 3 | 200 | 99 | 675 | 14 | 51 | 50 | 616 | ||||||||||||
Earnings per share from continuing operations attributable to equity holders of Agrium: | ||||||||||||||||||||
Basic and diluted | 0.02 | 1.45 | 0.72 | 4.71 | 0.08 | 0.46 | 0.63 | 4.34 | ||||||||||||
Loss per share from discontinued operations attributable to equity holders of Agrium: | ||||||||||||||||||||
Basic and diluted | - | - | - | - | - | (0.13 | ) | (0.28 | ) | (0.06 | ) | |||||||||
Earnings per share attributable to equity holders of Agrium: | ||||||||||||||||||||
Basic and diluted | 0.02 | 1.45 | 0.72 | 4.71 | 0.08 | 0.33 | 0.35 | 4.28 | ||||||||||||
The agricultural products business is seasonal. Consequently, year-over-year comparisons are more appropriate than quarter-over-quarter comparisons. Crop input sales are primarily concentrated in the spring and fall crop input application seasons. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections from accounts receivables generally occur after the application season is complete, and our customer prepayments are concentrated in December and January.
NON-IFRS FINANCIAL MEASURES
Financial measures that are not specified, defined or determined under IFRS are non-IFRS measures unless they are presented in our Consolidated Financial Statements. Accordingly, we have not identified any non-IFRS financial measures. We presented EBITDA in our 2015 annual consolidated financial statements and accordingly, it is not a non-IFRS measure. Effective January 1, 2016, management no longer considers "Adjusted EBITDA" in evaluating our business performance and expects to focus more on our other key earnings measures.
CRITICAL ACCOUNTING ESTIMATES
We prepare our financial statements in accordance with IFRS, which requires us to make judgments, assumptions and estimates in applying accounting policies. For further information on the Company's critical accounting estimates, refer to the section "Critical Accounting Estimates" in our 2015 annual MD&A, which is contained in our 2015 Annual Report. Since the date of our 2015 annual MD&A, there have not been any material changes to our critical accounting estimates.
CHANGES IN ACCOUNTING POLICIES
The accounting policies applied in our Consolidated Financial Statements for the three months ended March 31, 2016 are the same as those applied in our audited annual financial statements in our 2015 Annual Report.
BUSINESS RISKS
The information presented in the "Enterprise Risk Management" section on pages 63 - 66 in our 2015 annual MD&A and under the heading "Risk Factors" on pages 23 - 34 in our Annual Information Form for the year ended December 31, 2015 has not changed materially since December 31, 2015.
CONTROLS AND PROCEDURES
There have been no changes in our internal control over financial reporting during the three months ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PUBLIC SECURITIES FILINGS
Additional information about our Company, including our 2015 Annual Information Form is filed with the Canadian securities regulatory authorities through SEDAR at www.sedar.com and with the U.S. securities regulatory authorities through EDGAR at www.sec.gov.
FORWARD-LOOKING STATEMENTS
Certain statements and other information included in this document constitute "forward-looking information" and/or "financial outlook" within the meaning of applicable Canadian securities legislation or constitute "forward-looking statements" within the meaning of applicable U.S. securities legislation (collectively, the "forward-looking statements"). All statements in this news 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: updated 2016 annual guidance, including expectations regarding our diluted earnings per share; capital spending expectations for the remaining three quarters of 2016; expectations regarding performance of our business segments in 2016; and our market outlook for the 2016, including nitrogen, potash and phosphate outlook and including anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, crop mix, prices and the impact of currency fluctuations and import and export volumes. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements. The purpose of the outlook provided herein is to assist readers in understanding our expected and targeted financial and operating results, and this information may not be appropriate for other purposes.
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although Agrium believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The additional key assumptions that have been made include, among other things, assumptions with respect to Agrium's ability to successfully integrate and realize the anticipated benefits of its already completed and future acquisitions and that we will be able to implement our standards, controls, procedures and policies at any acquired businesses to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by Agrium, including with respect to prices, margins, product availability and supplier agreements; the completion of our expansion projects on schedule, as planned and on budget; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2016 and in the future; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to identify suitable candidates for acquisitions and negotiate acceptable terms; our ability to maintain our investment grade rating and achieve our performance targets; and our receipt, on time, of all necessary permits, utilities and project approvals with respect to our expansion projects and that we will have the resources necessary to meet the projects' approach. Also refer to the discussion under the heading "Key Assumptions and Risks in Respect of Forward-Looking Statements" in our 2015 annual MD&A and under the heading "Market Outlook" in this document, with respect to further material assumptions associated with our forward-looking statements.
Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general global economic, market and business conditions; weather conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our major products may vary from what we currently anticipate; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy, government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof, and political risks, including civil unrest, actions by armed groups or conflict, regional natural gas supply restrictions, as well as counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; gas supply interruptions at the Egyptian Misr Fertilizers Production Company S.A.E. nitrogen facility expansion in Egypt; the risk of additional capital expenditure cost escalation or delays in respect of our Borger nitrogen expansion project and the ramp-up of production following the tie-in of our Vanscoy potash expansion project; and other risk factors detailed from time to time in Agrium reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the U.S. including those disclosed under the heading "Risk Factors" in our Annual Information Form for the year ended December 31, 2015 and under the headings "Enterprise Risk Management" and "Key Assumptions and Risks in respect of Forward-Looking Statements" in our 2015 annual MD&A.
The purpose of our expected diluted earnings per share guidance range is to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes.
Agrium disclaims any intention or obligation to update or revise any forward-looking statements in this document as a result of new information or future events, except as may be required under applicable U.S. federal securities laws or applicable Canadian securities legislation.
OTHER
Agrium Inc. is a major producer and distributor of agricultural products and services in North America, South America, Australia and Egypt through its agricultural retail-distribution and wholesale nutrient businesses. Agrium supplies growers with key products and services such as crop nutrients, crop protection, seed, and agronomic and application services, thereby helping to meet the ever growing global demand for food and fiber. Agrium produces nitrogen, potash and phosphate fertilizers, with a combined wholesale nutrient capacity of over ten million tonnes and with competitive advantages across all product lines. Agrium retail-distribution has an unmatched network of over 1,400 facilities and more than 3,800 crop consultants. We partner with over half a million grower customers globally to help them increase their yields and returns on more than 50 different crops. With a focus on sustainability, the company strives to improve the communities in which it operates through safety, education, environmental improvement and new technologies such as the development of precision agriculture and controlled release nutrient products. Agrium is focused on driving operational excellence across our businesses, pursuing value-enhancing growth opportunities and returning capital to shareholders. For more information visit: www.agrium.com.
A WEBSITE SIMULCAST of the 2016 1st Quarter Conference Call will be available in a listen-only mode beginning Wednesday, May 4th, 2016 at 8:00 a.m. MT (10:00 a.m. ET). Please visit the following website: www.agrium.com.
AGRIUM INC. | ||||||||
Consolidated Statements of Operations | ||||||||
(Unaudited) | ||||||||
Three months ended | ||||||||
March 31, | ||||||||
(millions of U.S. dollars, unless otherwise stated) | Notes | 2016 | 2015 | |||||
Sales | 2,725 | 2,872 | ||||||
Cost of product sold | 2,171 | 2,288 | ||||||
Gross profit | 554 | 584 | ||||||
Expenses | ||||||||
Selling | 414 | 430 | ||||||
General and administrative | 55 | 67 | ||||||
Share-based payments | 5 | 4 | 45 | |||||
Earnings from associates and joint ventures | (5 | ) | - | |||||
Other expenses (income) | 4 | 11 | (33 | ) | ||||
Earnings before finance costs and income taxes | 75 | 75 | ||||||
Finance costs related to long-term debt | 52 | 37 | ||||||
Other finance costs | 18 | 19 | ||||||
Earnings before income taxes | 5 | 19 | ||||||
Income taxes | 2 | 5 | ||||||
Net earnings | 3 | 14 | ||||||
Attributable to | ||||||||
Equity holders of Agrium | 2 | 12 | ||||||
Non-controlling interest | 1 | 2 | ||||||
Net earnings | 3 | 14 | ||||||
Earnings per share attributable to equity holders of Agrium | ||||||||
Basic and diluted earnings per share | 0.02 | 0.08 | ||||||
Weighted average number of shares outstanding for basic and diluted earnings per share (millions of common shares) | 138 | 144 | ||||||
See accompanying notes. | ||||||||
Basis of preparation and statement of compliance
These consolidated interim financial statements ("interim financial statements") were approved for issuance by the Audit Committee on May 3, 2016. We prepared these interim financial statements in accordance with International Accounting Standard 34 Interim Financial Reporting. These interim financial statements do not include all information and disclosures normally provided in annual financial statements and should be read in conjunction with our audited annual financial statements and related notes contained in our 2015 Annual Report, available at www.agrium.com.
The accounting policies applied in these interim financial statements are the same as those applied in our audited annual financial statements in our 2015 Annual Report.
AGRIUM INC. | |||||||||||
Consolidated Statements of Comprehensive Income | |||||||||||
(Unaudited) | |||||||||||
Three months ended | |||||||||||
March 31, | |||||||||||
(millions of U.S. dollars) | Notes | 2016 | 2015 | ||||||||
Net earnings | 3 | 14 | |||||||||
Other comprehensive income (loss) | |||||||||||
Items that are or may be reclassified to earnings | |||||||||||
Cash flow hedges | 3 | ||||||||||
Effective portion of changes in fair value | (23 | ) | (16 | ) | |||||||
Deferred income taxes | 7 | 4 | |||||||||
Share of comprehensive income (loss) of associates and joint ventures | 2 | (5 | ) | ||||||||
Foreign currency translation | |||||||||||
Gains (losses) | 179 | (295 | ) | ||||||||
Other comprehensive income (loss) | 165 | (312 | ) | ||||||||
Comprehensive income (loss) | 168 | (298 | ) | ||||||||
Attributable to | |||||||||||
Equity holders of Agrium | 167 | (299 | ) | ||||||||
Non-controlling interest | 1 | 1 | |||||||||
Comprehensive income (loss) | 168 | (298 | ) | ||||||||
See accompanying notes. | |||||||||||
AGRIUM INC. | |||||||||||
Consolidated Balance Sheets | |||||||||||
(Unaudited) | |||||||||||
March 31, | December 31, | ||||||||||
(millions of U.S. dollars) | Notes | 2016 | 2015 | 2015 | |||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | 276 | 780 | 515 | ||||||||
Accounts receivable | 2,200 | 2,045 | 2,053 | ||||||||
Income taxes receivable | 61 | 112 | 4 | ||||||||
Inventories | 4,524 | 4,820 | 3,314 | ||||||||
Prepaid expenses and deposits | 254 | 315 | 688 | ||||||||
Other current assets | 152 | 123 | 144 | ||||||||
7,467 | 8,195 | 6,718 | |||||||||
Property, plant and equipment | 6,712 | 6,177 | 6,333 | ||||||||
Intangibles | 645 | 660 | 632 | ||||||||
Goodwill | 1,988 | 2,027 | 1,980 | ||||||||
Investments in associates and joint ventures | 637 | 595 | 607 | ||||||||
Other assets | 54 | 69 | 54 | ||||||||
Deferred income tax assets | 52 | 72 | 53 | ||||||||
17,555 | 17,795 | 16,377 | |||||||||
Liabilities and shareholders' equity | |||||||||||
Current liabilities | |||||||||||
Short-term debt | 6 | 629 | 265 | 835 | |||||||
Accounts payable | 5,309 | 5,672 | 3,919 | ||||||||
Income taxes payable | 1 | 4 | 82 | ||||||||
Current portion of long-term debt | 108 | 1 | 8 | ||||||||
Current portion of other provisions | 81 | 88 | 85 | ||||||||
6,128 | 6,030 | 4,929 | |||||||||
Long-term debt | 4,415 | 4,534 | 4,513 | ||||||||
Post-employment benefits | 132 | 144 | 124 | ||||||||
Other provisions | 337 | 332 | 336 | ||||||||
Other liabilities | 76 | 75 | 85 | ||||||||
Deferred income tax liabilities | 402 | 393 | 383 | ||||||||
11,490 | 11,508 | 10,370 | |||||||||
Shareholders' equity | |||||||||||
Share capital | 1,759 | 1,823 | 1,757 | ||||||||
Retained earnings | 5,414 | 5,402 | 5,533 | ||||||||
Accumulated other comprehensive loss | (1,113 | ) | (946 | ) | (1,287 | ) | |||||
Equity holders of Agrium | 6,060 | 6,279 | 6,003 | ||||||||
Non-controlling interest | 5 | 8 | 4 | ||||||||
Total equity | 6,065 | 6,287 | 6,007 | ||||||||
17,555 | 17,795 | 16,377 | |||||||||
See accompanying notes. | |||||||||||
AGRIUM INC. | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(Unaudited) | ||||||||
Three months ended | ||||||||
March 31, | ||||||||
(millions of U.S. dollars) | 2016 | 2015 | ||||||
Operating | ||||||||
Net earnings | 3 | 14 | ||||||
Adjustments for | ||||||||
Depreciation and amortization | 114 | 111 | ||||||
Earnings from associates and joint ventures | (5 | ) | - | |||||
Share-based payments | 4 | 45 | ||||||
Unrealized loss on derivative financial instruments | 83 | 26 | ||||||
Unrealized foreign exchange (gain) loss | (124 | ) | 41 | |||||
Interest income | (13 | ) | (17 | ) | ||||
Finance costs | 70 | 56 | ||||||
Income taxes | 2 | 5 | ||||||
Other | 6 | (25 | ) | |||||
Interest received | 14 | 17 | ||||||
Interest paid | (89 | ) | (42 | ) | ||||
Income taxes (paid) received | (141 | ) | 18 | |||||
Dividends from associates and joint ventures | 1 | 1 | ||||||
Net changes in non-cash working capital | 418 | 455 | ||||||
Cash provided by operating activities | 343 | 705 | ||||||
Investing | ||||||||
Business acquisitions, net of cash acquired | (94 | ) | (60 | ) | ||||
Capital expenditures | (174 | ) | (399 | ) | ||||
Capitalized borrowing costs | (5 | ) | (15 | ) | ||||
Purchase of investments | (23 | ) | (42 | ) | ||||
Proceeds from sale of investments | 18 | 18 | ||||||
Proceeds from sale of property, plant and equipment | 4 | 50 | ||||||
Other | (3 | ) | 5 | |||||
Net changes in non-cash working capital | - | (18 | ) | |||||
Cash used in investing activities | (277 | ) | (461 | ) | ||||
Financing | ||||||||
Short-term debt | (204 | ) | (1,160 | ) | ||||
Long-term debt issued | - | 1,000 | ||||||
Transaction costs on long-term debt | - | (14 | ) | |||||
Repayment of long-term debt | (2 | ) | (13 | ) | ||||
Dividends paid | (119 | ) | (109 | ) | ||||
Shares issued | - | 1 | ||||||
Cash used in financing activities | (325 | ) | (295 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 20 | (17 | ) | |||||
Decrease in cash and cash equivalents | (239 | ) | (68 | ) | ||||
Cash and cash equivalents - beginning of period | 515 | 848 | ||||||
Cash and cash equivalents - end of period | 276 | 780 | ||||||
See accompanying notes. | ||||||||
AGRIUM INC. |
Consolidated Statements of Shareholders' Equity |
(Unaudited) |
Other comprehensive income (loss) | ||||||||||||||||||||||||||||||
(millions of U.S. dollars, except per share data) |
Millions of common shares |
Share capital |
Retained earnings |
Cash flow hedges |
Comprehensive loss of associates and joint ventures |
Foreign currency translation |
Total |
Equity holders of Agrium |
Non- controlling interest |
Total equity |
||||||||||||||||||||
December 31, 2014 | 144 | 1,821 | 5,502 | (27 | ) | (11 | ) | (605 | ) | (643 | ) | 6,680 | 7 | 6,687 | ||||||||||||||||
Net earnings | - | - | 12 | - | - | - | - | 12 | 2 | 14 | ||||||||||||||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||||||||
Other | - | - | - | (12 | ) | (5 | ) | (294 | ) | (311 | ) | (311 | ) | (1 | ) | (312 | ) | |||||||||||||
Comprehensive income (loss), net of tax | - | - | 12 | (12 | ) | (5 | ) | (294 | ) | (311 | ) | (299 | ) | 1 | (298 | ) | ||||||||||||||
Dividends ($0.78 per share) | - | - | (112 | ) | - | - | - | - | (112 | ) | - | (112 | ) | |||||||||||||||||
Share-based payment transactions | - | 2 | - | - | - | - | - | 2 | - | 2 | ||||||||||||||||||||
Reclassification of cash flow hedges, net of tax | - | - | - | 8 | - | - | 8 | 8 | - | 8 | ||||||||||||||||||||
March 31, 2015 | 144 | 1,823 | 5,402 | (31 | ) | (16 | ) | (899 | ) | (946 | ) | 6,279 | 8 | 6,287 | ||||||||||||||||
December 31, 2015 | 138 | 1,757 | 5,533 | (56 | ) | (17 | ) | (1,214 | ) | (1,287 | ) | 6,003 | 4 | 6,007 | ||||||||||||||||
Net earnings | - | - | 2 | - | - | - | - | 2 | 1 | 3 | ||||||||||||||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||||||||
Other | - | - | - | (16 | ) | 2 | 179 | 165 | 165 | - | 165 | |||||||||||||||||||
Comprehensive income (loss), net of tax | - | - | 2 | (16 | ) | 2 | 179 | 165 | 167 | 1 | 168 | |||||||||||||||||||
Dividends ($0.875 per share) | - | - | (121 | ) | - | - | - | - | (121 | ) | - | (121 | ) | |||||||||||||||||
Share-based payment transactions | - | 2 | - | - | - | - | - | 2 | - | 2 | ||||||||||||||||||||
Reclassification of cash flow hedges, net of tax | - | - | - | 9 | - | - | 9 | 9 | - | 9 | ||||||||||||||||||||
March 31, 2016 | 138 | 1,759 | 5,414 | (63 | ) | (15 | ) | (1,035 | ) | (1,113 | ) | 6,060 | 5 | 6,065 |
See accompanying notes. |
AGRIUM INC. |
Summarized Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2016 |
(millions of U.S. dollars, unless otherwise stated) |
(Unaudited) |
1. Corporate Management
Corporate information
Agrium Inc. ("Agrium") is incorporated under the laws of Canada with common shares listed under the symbol "AGU" on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX). Our Corporate head office is located at 13131 Lake Fraser Drive S.E., Calgary, Canada. We conduct our operations globally from our Wholesale head office in Calgary and our Retail head office in Loveland, Colorado, United States. In these financial statements, "we", "us", "our" and "Agrium" mean Agrium Inc., its subsidiaries and joint arrangements.
We categorize our operating segments within the Retail and Wholesale business units as follows:
Additional information on our operating segments is included in note 2.
Seasonality in our business results from increased demand for our products during planting seasons. Sales are generally higher in spring and fall.
AGRIUM INC. |
Summarized Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2016 |
(millions of U.S. dollars, unless otherwise stated) |
(Unaudited) |
2. Operating Segments |
Segment information by business unit | Three months ended March 31, | ||||||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||||||
Retail | Wholesale | Other (a) | Total | Retail | Wholesale | Other (a) | Total | ||||||||||||||||||
Sales | - external | 2,278 | 447 | - | 2,725 | 2,260 | 612 | - | 2,872 | ||||||||||||||||
- inter-segment | 12 | 202 | (214 | ) | - | 3 | 255 | (258 | ) | - | |||||||||||||||
Total sales | 2,290 | 649 | (214 | ) | 2,725 | 2,263 | 867 | (258 | ) | 2,872 | |||||||||||||||
Cost of product sold | 1,888 | 496 | (213 | ) | 2,171 | 1,892 | 633 | (237 | ) | 2,288 | |||||||||||||||
Gross profit | 402 | 153 | (1 | ) | 554 | 371 | 234 | (21 | ) | 584 | |||||||||||||||
Gross profit (%) | 18 | 24 | 20 | 16 | 27 | 20 | |||||||||||||||||||
Expenses | |||||||||||||||||||||||||
Selling | 410 | 8 | (4 | ) | 414 | 423 | 11 | (4 | ) | 430 | |||||||||||||||
General and administrative | 22 | 8 | 25 | 55 | 26 | 10 | 31 | 67 | |||||||||||||||||
Share-based payments | - | - | 4 | 4 | - | - | 45 | 45 | |||||||||||||||||
(Earnings) loss from associates and joint ventures | (4 | ) | (1 | ) | - | (5 | ) | (1 | ) | 3 | (2 | ) | - | ||||||||||||
Other (income) expenses | (3 | ) | 19 | (5 | ) | 11 | (12 | ) | (22 | ) | 1 | (33 | ) | ||||||||||||
(Loss) earnings before finance costs and income taxes | (23 | ) | 119 | (21 | ) | 75 | (65 | ) | 232 | (92 | ) | 75 | |||||||||||||
Finance costs | - | - | 70 | 70 | - | - | 56 | 56 | |||||||||||||||||
(Loss) earnings before income taxes | (23 | ) | 119 | (91 | ) | 5 | (65 | ) | 232 | (148 | ) | 19 | |||||||||||||
Depreciation and amortization | 67 | 44 | 3 | 114 | 57 | 50 | 4 | 111 | |||||||||||||||||
Finance costs | - | - | 70 | 70 | - | - | 56 | 56 | |||||||||||||||||
EBITDA (b) | 44 | 163 | (18 | ) | 189 | (8 | ) | 282 | (88 | ) | 186 |
(a) | Includes inter-segment eliminations. | |
(b) | EBITDA is earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization. | |
AGRIUM INC. |
Summarized Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2016 |
(millions of U.S. dollars, unless otherwise stated) |
(Unaudited) |
Segment information - Retail | Three months ended March 31, | ||||||||||||||||||
2016 | 2015 | ||||||||||||||||||
North | North | ||||||||||||||||||
America | International | Retail | America | International | Retail | ||||||||||||||
Sales | - external | 1,797 | 481 | 2,278 | 1,773 | 487 | 2,260 | ||||||||||||
- inter-segment | 12 | - | 12 | 3 | - | 3 | |||||||||||||
Total sales | 1,809 | 481 | 2,290 | 1,776 | 487 | 2,263 | |||||||||||||
Cost of product sold | 1,506 | 382 | 1,888 | 1,503 | 389 | 1,892 | |||||||||||||
Gross profit | 303 | 99 | 402 | 273 | 98 | 371 | |||||||||||||
Expenses | |||||||||||||||||||
Selling | 337 | 73 | 410 | 345 | 78 | 423 | |||||||||||||
General and administrative | 15 | 7 | 22 | 17 | 9 | 26 | |||||||||||||
Earnings from associates and joint ventures | (4 | ) | - | (4 | ) | (1 | ) | - | (1 | ) | |||||||||
Other expenses (income) | 6 | (9 | ) | (3 | ) | (3 | ) | (9 | ) | (12 | ) | ||||||||
(Loss) earnings before income taxes | (51 | ) | 28 | (23 | ) | (85 | ) | 20 | (65 | ) | |||||||||
Depreciation and amortization | 61 | 6 | 67 | 52 | 5 | 57 | |||||||||||||
EBITDA | 10 | 34 | 44 | (33 | ) | 25 | (8 | ) | |||||||||||
AGRIUM INC. |
Summarized Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2016 |
(millions of U.S. dollars, unless otherwise stated) |
(Unaudited) |
Segment information - Wholesale | Three months ended March 31, | ||||||||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||||||||
Wholesale | Wholesale | ||||||||||||||||||||||||||
Nitrogen | Potash | Phosphate | Other (a) | Wholesale | Nitrogen | Potash | Phosphate | Other (a) | Wholesale | ||||||||||||||||||
Sales | - external | 173 | 48 | 80 | 146 | 447 | 218 | 25 | 110 | 259 | 612 | ||||||||||||||||
- inter-segment | 77 | 43 | 50 | 32 | 202 | 97 | 42 | 71 | 45 | 255 | |||||||||||||||||
Total sales | 250 | 91 | 130 | 178 | 649 | 315 | 67 | 181 | 304 | 867 | |||||||||||||||||
Cost of product sold | 155 | 77 | 110 | 154 | 496 | 172 | 60 | 136 | 265 | 633 | |||||||||||||||||
Gross profit | 95 | 14 | 20 | 24 | 153 | 143 | 7 | 45 | 39 | 234 | |||||||||||||||||
Expenses | |||||||||||||||||||||||||||
Selling | 4 | 2 | 1 | 1 | 8 | 4 | 1 | 1 | 5 | 11 | |||||||||||||||||
General and administrative | 4 | 2 | 1 | 1 | 8 | 3 | 2 | 2 | 3 | 10 | |||||||||||||||||
(Earnings) loss from associates and joint ventures | - | - | - | (1 | ) | (1 | ) | - | - | - | 3 | 3 | |||||||||||||||
Other expenses (income) | 6 | 6 | 4 | 3 | 19 | (2 | ) | 5 | 12 | (37 | ) | (22 | ) | ||||||||||||||
Earnings (loss) before income taxes | 81 | 4 | 14 | 20 | 119 | 138 | (1 | ) | 30 | 65 | 232 | ||||||||||||||||
Depreciation and amortization | 13 | 20 | 10 | 1 | 44 | 18 | 14 | 13 | 5 | 50 | |||||||||||||||||
EBITDA | 94 | 24 | 24 | 21 | 163 | 156 | 13 | 43 | 70 | 282 | |||||||||||||||||
(a) | Includes product purchased for resale, ammonium sulfate, ESN and other products. | |
AGRIUM INC. |
Summarized Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2016 |
(millions of U.S. dollars, unless otherwise stated) |
(Unaudited) |
Gross profit by product line | Three months ended March 31, | ||||||||||||||||||
2016 | 2015 | ||||||||||||||||||
Cost of | Cost of | ||||||||||||||||||
product | Gross | product | Gross | ||||||||||||||||
Sales | sold | profit | Sales | sold | profit | ||||||||||||||
Retail | |||||||||||||||||||
Crop nutrients | 839 | 705 | 134 | 911 | 785 | 126 | |||||||||||||
Crop protection products | 831 | 710 | 121 | 793 | 685 | 108 | |||||||||||||
Seed | 376 | 325 | 51 | 308 | 268 | 40 | |||||||||||||
Merchandise | 117 | 98 | 19 | 142 | 122 | 20 | |||||||||||||
Services and other | 127 | 50 | 77 | 109 | 32 | 77 | |||||||||||||
2,290 | 1,888 | 402 | 2,263 | 1,892 | 371 | ||||||||||||||
Wholesale | |||||||||||||||||||
Nitrogen | 250 | 155 | 95 | 315 | 172 | 143 | |||||||||||||
Potash | 91 | 77 | 14 | 67 | 60 | 7 | |||||||||||||
Phosphate | 130 | 110 | 20 | 181 | 136 | 45 | |||||||||||||
Product purchased for resale | 97 | 92 | 5 | 192 | 185 | 7 | |||||||||||||
Ammonium sulfate, ESN and other | 81 | 62 | 19 | 112 | 80 | 32 | |||||||||||||
649 | 496 | 153 | 867 | 633 | 234 | ||||||||||||||
Other inter-segment eliminations | (214 | ) | (213 | ) | (1 | ) | (258 | ) | (237 | ) | (21 | ) | |||||||
Total | 2,725 | 2,171 | 554 | 2,872 | 2,288 | 584 | |||||||||||||
Wholesale share of joint ventures | |||||||||||||||||||
Nitrogen | 25 | 21 | 4 | 21 | 22 | (1 | ) | ||||||||||||
Product purchased for resale | - | - | - | 26 | 25 | 1 | |||||||||||||
25 | 21 | 4 | 47 | 47 | - | ||||||||||||||
Total Wholesale including proportionate share in joint ventures | 674 | 517 | 157 | 914 | 680 | 234 | |||||||||||||
AGRIUM INC. |
Summarized Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2016 |
(millions of U.S. dollars, unless otherwise stated) |
(Unaudited) |
Selected volumes and per tonne information | Three months ended March 31, | |||||||||||||||||||
2016 | 2015 | |||||||||||||||||||
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) | |||||||||||||
Retail | ||||||||||||||||||||
Crop nutrients | ||||||||||||||||||||
North America | 1,520 | 450 | 369 | 81 | 1,435 | 511 | 431 | 80 | ||||||||||||
International | 440 | 354 | 328 | 26 | 452 | 394 | 366 | 28 | ||||||||||||
Total crop nutrients | 1,960 | 428 | 360 | 68 | 1,887 | 483 | 416 | 67 | ||||||||||||
Wholesale | ||||||||||||||||||||
Nitrogen | ||||||||||||||||||||
North America | ||||||||||||||||||||
Ammonia | 230 | 398 | 175 | 529 | ||||||||||||||||
Urea | 319 | 338 | 348 | 422 | ||||||||||||||||
Other | 192 | 265 | 238 | 320 | ||||||||||||||||
Total nitrogen | 741 | 338 | 209 | 129 | 761 | 414 | 226 | 188 | ||||||||||||
Potash | ||||||||||||||||||||
North America | 263 | 215 | 149 | 393 | ||||||||||||||||
International | 193 | 177 | 36 | 226 | ||||||||||||||||
Total potash | 456 | 199 | 168 | 31 | 185 | 361 | 324 | 37 | ||||||||||||
Phosphate | 220 | 589 | 499 | 90 | 282 | 639 | 481 | 158 | ||||||||||||
Product purchased for resale | 297 | 326 | 310 | 16 | 548 | 349 | 336 | 13 | ||||||||||||
Ammonium sulfate | 57 | 289 | 113 | 176 | 82 | 335 | 134 | 201 | ||||||||||||
ESN and other | 155 | 176 | ||||||||||||||||||
Total Wholesale | 1,926 | 337 | 258 | 79 | 2,034 | 426 | 311 | 115 | ||||||||||||
Wholesale share of joint ventures | ||||||||||||||||||||
Nitrogen | 83 | 296 | 247 | 49 | 52 | 408 | 429 | (21 | ) | |||||||||||
Product purchased for resale | - | - | - | - | 85 | 310 | 297 | 13 | ||||||||||||
83 | 296 | 247 | 49 | 137 | 347 | 347 | - | |||||||||||||
Total Wholesale including proportionate share in joint ventures | 2,009 | 335 | 257 | 78 | 2,171 | 421 | 313 | 108 | ||||||||||||
AGRIUM INC. |
Summarized Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2016 |
(millions of U.S. dollars, unless otherwise stated) |
(Unaudited) |
3. Risk Management |
Commodity price risk | ||||||||||||||||||
Natural gas derivative financial instruments outstanding (notional amounts in millions of MMBtu) | ||||||||||||||||||
March 31, | December 31, | |||||||||||||||||
2016 | 2015 | |||||||||||||||||
Notional |
Maturities |
Average contract price (a) |
Fair value of assets (liabilities) |
Notional |
Maturities |
Average contract price (a) |
Fair value of assets (liabilities) |
|||||||||||
Designated as hedges | ||||||||||||||||||
AECO swaps | 67 | 2016 - 2018 | 2.97 | (74 | ) | 74 | 2016 - 2018 | 2.78 | (56 | ) | ||||||||
(74 | ) | (56 | ) | |||||||||||||||
(a) U.S. dollars per MMBtu. | ||||||||||||||||||
Fair value of assets (liabilities) | |||||||
Maturities of natural gas derivative contracts | 2016 | 2017 | 2018 | 2019 | |||
Designated as hedges | (31) | (24) | (19) | - | |||
Impact of change in fair value of natural gas derivative financial instruments | March 31, | December 31, | ||
2016 | 2015 | |||
A $10-million impact to other comprehensive income requires movement in gas prices per MMBtu | 0.20 | 0.28 | ||
Use of derivatives to hedge exposure to natural gas market price risk | ||||||||||
Term (gas year - 12 months ending October 31) | 2016 | 2017 | 2018 | 2019 | ||||||
Maximum allowable (% of forecast gas requirements) | 75 | 75 | 75 | 25 | (a) | |||||
Forecast average monthly natural gas consumption (millions of MMBtu) | 9 | 9 | 9 | 9 | ||||||
Gas requirements hedged using derivatives designated as hedges (%) | 25 | 25 | 21 | - |
(a) | Maximum monthly hedged volume may not exceed 90 percent of planned monthly requirements. | |
For our natural gas derivatives designated in hedging relationships, the underlying risk of the derivative contracts is identical to the hedged risk, and accordingly we have established a ratio of 1:1 for all natural gas hedges. Due to a strong correlation between AECO future contract prices and our delivered cost, we did not experience any ineffectiveness on our hedges, and accordingly we have recorded the full change in the fair value of natural gas derivative contracts designated as hedges to other comprehensive income.
AGRIUM INC. |
Summarized Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2016 |
(millions of U.S. dollars, unless otherwise stated) |
(Unaudited) |
Currency risk |
Foreign exchange derivative financial instruments outstanding (notional amounts in millions of U.S. dollars) |
March 31, | December 31, | |||||||||||||||||||
2016 | 2015 | |||||||||||||||||||
Sell/Buy |
Notional |
Maturities |
Average contract price (a) |
Fair value of assets (liabilities) |
Notional |
Maturities |
Average contract price (a) |
Fair value of assets (liabilities) |
||||||||||||
Not designated as hedges | ||||||||||||||||||||
Forwards | ||||||||||||||||||||
USD/CAD | 10 | 2016 | 1.34 | - | 190 | 2016 | 1.38 | (1 | ) | |||||||||||
CAD/USD | 1,883 | 2016 | 1.33 | (50 | ) | 1,805 | 2016 | 1.35 | 45 | |||||||||||
USD/AUD | 76 | 2016 | 1.43 | 7 | 73 | 2016 | 1.42 | 2 | ||||||||||||
AUD/USD | 48 | 2016 | 1.43 | (4 | ) | 143 | 2016 | 1.43 | (3 | ) | ||||||||||
Options | ||||||||||||||||||||
USD/CAD - buy USD puts | 38 | 2016 | 1.37 | 2 | - | - | - | - | ||||||||||||
USD/CAD - sell USD calls | 53 | 2016 | 1.50 | - | - | - | - | - | ||||||||||||
USD/AUD - buy USD puts | 6 | 2016 | 1.32 | - | 59 | 2016 | 1.38 | (1 | ) | |||||||||||
(45 | ) | 42 | ||||||||||||||||||
Designated as hedges | ||||||||||||||||||||
Forwards | ||||||||||||||||||||
CAD/USD | 158 | 2016 | 1.37 | (8 | ) | - | - | - | - | |||||||||||
AUD/USD | 26 | 2016 | 1.38 | (2 | ) | - | - | - | - | |||||||||||
(10 | ) | - | ||||||||||||||||||
(55 | ) | 42 |
(a) | Foreign currency per U.S. dollar. | |
March 31, | December 31, | |||||||||||||
2016 | 2015 | |||||||||||||
Fair value | Carrying | Fair value | Carrying | |||||||||||
Level 1 | Level 2 | value | Level 1 | Level 2 | value | |||||||||
Financial instruments measured at fair value on a recurring basis | ||||||||||||||
Cash and cash equivalents | - | 276 | 276 | - | 515 | 515 | ||||||||
Accounts receivable - derivatives | - | 9 | 9 | - | 48 | 48 | ||||||||
Other current financial assets - marketable securities | 20 | 129 | 149 | 20 | 122 | 142 | ||||||||
Accounts payable - derivatives | - | 100 | 100 | - | 29 | 29 | ||||||||
Other financial liabilities - derivatives | - | 38 | 38 | - | 33 | 33 | ||||||||
Financial instruments measured at amortized cost | ||||||||||||||
Current portion of long-term debt | ||||||||||||||
Debentures | - | 105 | 100 | - | - | - | ||||||||
Floating rate debt | - | 8 | 8 | - | 8 | 8 | ||||||||
Long-term debt | ||||||||||||||
Debentures | - | 4,533 | 4,370 | - | 4,464 | 4,469 | ||||||||
Fixed and floating rate debt | - | 45 | 45 | - | 44 | 44 | ||||||||
There have been no transfers between Level 1 and Level 2 fair value measurements in the three months ended March 31, 2016 or March 31, 2015. We do not measure any of our financial instruments using Level 3 inputs.
AGRIUM INC. |
Summarized Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2016 |
(millions of U.S. dollars, unless otherwise stated) |
(Unaudited) |
4. Expenses |
Three months ended | ||||||
Other expenses | March 31, | |||||
2016 | 2015 | |||||
Loss (gain) on foreign exchange and related derivatives | 2 | (1 | ) | |||
Interest income | (13 | ) | (17 | ) | ||
Gain on sale of assets | - | (38 | ) | |||
Environmental remediation and asset retirement obligations | 2 | 9 | ||||
Bad debt expense | 8 | 7 | ||||
Potash profit and capital tax | 3 | 5 | ||||
Other | 9 | 2 | ||||
11 | (33 | ) |
5. Share-based Payments |
During the three months ended March 31, 2016, we granted the following share-based compensation awards to officers and employees.
Award type | Number | Grant price | ||
Stock options | 514,779 | 84.37 | ||
Stock appreciation rights | 88,147 | 84.37 | ||
Share units | 315,315 | N/A |
6. Debt |
March 31, | December 31, | ||||||||
2016 | 2015 | ||||||||
Maturity | Rate (%) (a) | ||||||||
Short-term debt | |||||||||
Commercial paper | 2016 | 0.87 | 508 | 632 | |||||
Credit facilities | 4.69 | 121 | 203 | ||||||
629 | 835 |
(a) | Weighted average rates at March 31, 2016. |
FOR FURTHER INFORMATION:
Investor/Media Relations:
Richard Downey
Vice President, Investor & Corporate Relations
(403) 225-7357
Todd Coakwell
Director, Investor Relations
(403) 225-7437
Louis Brown
Analyst, Investor Relations
(403) 225-7761
Contact us at: www.agrium.com