Agrium Incorporated. Q1 2010 Earnings Call Transcript - TheStreet

Agrium Incorporated. Q1 2010 Earnings Call Transcript

Agrium Incorporated. Q1 2010 Earnings Call Transcript
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Agrium Incorporated. (AGU)

Q1 2010 Earnings Call

May 5, 2010 11:30 a.m. ET

Executives

Richard Downey - Senior Director of IR

Mike Wilson - President and CEO

Bruce Waterman - CFO

Analysts

Jacob Bout - CIBC

P.J. Juvekar - Citi Group

Jason Miner - Deutsche Bank

Elaine Yip - Credit Suisse

Robert Koort - Goldman Sachs

Fai Lee - RBC Capital Markets

Edlain Rodriguez - Broadpoint Gleacher

Hari Sambasivam - National Bank Financial

Martin Lavigueur - Macquarie

David Silver - Bank of America

Horst Hueniken - Thomas Weisel Partners

Mark Connelly - CLFA

Presentation

Operator

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Good day everyone, and welcome to today’s Agrium Incorporated Conference Call. Following today’s remarks, we will conduct an electronic question-and-answer session. Instructions on how to pose your question will be given at that time. As a reminder this call is being recorded.

Now, for opening remarks and introductions, I’d like to turn the conference over to Mr. Richard Downey, Senior Director, Investor Relations. Thank you. Please go ahead.

Richard Downey

Thank you, operator. Good morning everyone and welcome to Agrium’s 2010 first quarter conference call. On the phone with us today is Mr. Mike Wilson, President and CEO of Agrium. He’s joined by our CFO, Mr. Bruce Waterman and as well as other Agrium officers to review and discuss our results.

As we conduct this conference call, various statements that we make about future expectations, plans and prospects containing forward-looking information. Certain material assumptions were applied in making these conclusions and forecasts. Therefore, actual results could differ materially from those contained in our forward-looking information.

Additional information about these factors and assumptions are contained in our current quarterly report to our shareholders, as well as our most recent Annual Report, MD&A and Annual Information Form filed with Canadian and U.S. Security Commissions to which we direct you.

I will now turn the call over to Mr. Mike Wilson.

Mike Wilson

Thank you, Richard, and good morning and thank you for joining us today for our 2010 first quarter conference call. This morning I’ll provide highlights of our first quarter operating results, and share our insights on the spring season for the crop input market, will providing additional color to our earnings guidance for the second quarter and remind shareholders that the fundamentals remains strong for our business

I’d like to take a moment to personally thank those Agrium employees who put great effort in attempting to bring Agrium and CF together. Agrium has always been committed to a disciplined approach to grow in order to deliver value for our shareholders.

Our decision to ultimately terminate our offer for CF is another example of that that discipline. Under the circumstances, it was the right thing to do to ensure value for our shareholders.

Now the current business, our first quarter is typically our least profitable quarter, as we build inventories across all three business units in preparation for the spring season.

That being said, our wholesale business unit delivered the strongest first quarter ever from a net sales and volume perspective. And its second best ever first quarter gross profit in EBIT.

The cold weather in March significantly impacted our first quarter results for retail products and services, pushing sales into the second quarter. For wholesale, the weather reduced to proportionate of ammonia sales made into the higher valued agriculture market versus industrial sales in the first quarter.

We reported a net loss of 7 million in this quarter or $0.04 loss per share. However, excluding GAAP and other hedge position losses and stock based compensation expenses of which almost all were non-cash. Our net earnings were $0.41 per share for the quarter. This first quarter also included tax benefit of $0.17 per share on a previously unreal recognized tax benefit.

However, this is expected to be partly offset by $0.08 per share non-cash expense related to an anticipated one time tax change in Canada, in the second quarter of 2010, which is included in our guidance. So there is a balancing of tax one time components, as we move to the year.

We anticipate strong second quarter results as the fundamentals for agriculture through this spring season, and the crop input market remain solid. As a result, we expect our second quarter earnings to be in the range of $2.50 to $3, which would be the second highest quarterly earnings in our history.

Further more our field activity in March was heavily constraint due to adverse weather. The weather in April was near perfect. In fact, we’d probably experience the most active April on record.

Moving to our retail first quarter results, net sales were similar to last year at $1.1 billion. Gross profit was a 162 million this quarter, a $20 million increased over last year while our EBIT showed the 22 million year-over-year improvement.

Increased in retail earnings are due to a significant improvement in crop nutrients results. Gross profit for the segment was $63 million for a quarter, up significantly from 18 million the previous year. Crop nutrient margins approach to a more normal levels 17% for the first quarter, well above the 4% experienced last year.

Our crop nutrient sales volumes in the first quarter of 2010 were stronger than last year. Delayed start to the spring application season push sales in the southern U.S into April and May. The good news is that demand for crop nutrients was extremely high in April with many regions running out of product particularly ammonia.

Rains at the end of April were welcome since it allowed some restocking to take place. As many of our original managers said, in their weekly report at the end of April, it’s been a long time since they have been happy to see rain arriving in the spring. The breaking activity has provided the time to refill inventories in preparation for the remaining fertilizer application season.

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