Release Date: 2/10/2005
CALGARY, Alberta--(BUSINESS WIRE)--Feb. 10, 2005--
ALL AMOUNTS ARE STATED IN U.S.$
Agrium Inc. (TSX:AGU) (NYSE:AGU) announced today that net earnings for the fourth quarter were $102-million ($0.71 diluted earnings per share). Net earnings for the year were $276-million ($1.91 diluted earnings per share).
"We delivered strong results in 2004. EBITDA was over $600-million; our cash position doubled from the previous year; and our revenues exceeded $3-billion. Our Retail operations achieved record EBIT and EBITDA in 2004, with revenues reaching a record $1.1-billion. Fourth quarter 2004 margins for all of our wholesale product groups increased both over the previous quarter and on a year-over-year basis," said Mike Wilson, Agrium's President and CEO.
"Our U.S. retail business is anticipating a good spring season based on feedback from customers. The fundamentals continue to be favorable for both our wholesale and retail operations, and we are looking forward to strong financial performance in 2005."
"We recently announced we are redeeming $175-million in preferred securities with cash. This provides a number of financial benefits, such as reduced security charges and reduced dilution in our earnings per share, while maintaining our financial capability to pursue opportunities that add value for shareholders," said Mr. Wilson.
KEY DEVELOPMENTS
Pricing and gross margin improved in the fourth quarter of 2004 for all three major product groups both year-over-year and as compared to the third quarter of 2004. Strong urea and other nitrogen sales more than offset a weak fall ammonia application season in North America due to weather. Average nitrogen margins reached $82 per tonne, representing an eight percent increase compared to the third quarter and a 28 percent increase over the same quarter last year. These higher margins were realized in spite of our effective gas cost increasing by $1.23 /MMBtu from the fourth quarter of 2003 to $4.54 /MMBtu for fourth quarter 2004 production. The AECO basis averaged $1.06 /MMBtu for the fourth quarter and $0.86 /MMBtu for the year. Agrium's average potash price continued to strengthen, increasing eight dollars per tonne over the third quarter, and Agrium's fourth quarter average phosphate margins increased by seven dollars per tonne over the previous quarter.
- Our Retail results were excellent, with total Retail EBITDA of $21-million for the quarter and $99-million for the year. Our U.S.-based retail operations delivered an eighth consecutive year of record earnings and our South American-based operations contributed $11-million in EBITDA for the year. In February, Agrium announced the acquisition of additional retail operations in Argentina, Chile and Bolivia.
- Cash provided by operating activities was $191-million in the fourth quarter, bringing the total cash provided by operating activities to $449-million for 2004. In January, we announced the redemption of our eight percent preferred securities. In 2004, these preferred securities diluted our earnings per share by $0.11.
- Moody's rating agency announced this week they have affirmed the senior unsecured debt rating of Baa2 for Agrium, and raised their outlook from negative to stable due to improved financial conditions and a solid industry outlook.
- In February, we announced plans to complete the engineering work to expand our production capability for our patented-process controlled release urea products. One of these products, ESN(R), recently received two separate awards, one in Canada and one in the U.S., for best new farm technologies.
Excluding Special Items, consisting of the Kenai-related award and settlement in 2004 and the write-down of our Kenai facility in 2003, net earnings for the fourth quarter of 2004 set a new record at $75-million ($0.52 diluted earnings per share), more than double net earnings of $31-million ($0.22 diluted earnings per share) for the same period in 2003. Excluding Special Items, net earnings for the year 2004 were $224-million ($1.56 diluted earnings per share), a significant improvement over 2003 net earnings of $119-million ($0.82 diluted earnings per share).
MANAGEMENT'S DISCUSSION AND ANALYSIS
February 9, 2005
The following Management's Discussion and Analysis (MD&A) contained in this interim report updates our annual MD&A included in our 2003 Annual Report to Shareholders, to which readers are referred. No update is provided where an item is not material or there has been no material change from the discussion in our annual MD&A.
OVERVIEW OF CONSOLIDATED FINANCIAL HIGHLIGHTS
Net Earnings
Agrium's fourth quarter consolidated net earnings were $102-million, up $211-million from the $109-million net loss reported for the same quarter of 2003. Diluted earnings per share were $0.71 compared to a loss of $0.89 for the same quarter last year. While earnings continue to benefit from the tight supply and demand fertilizer market fundamentals, our fourth quarter results were improved by the recognition of liquidated damages in the quarter under the Arbitration Panel award and a $36-million gain recognized from the settlement of litigation, both related to our Kenai, Alaska nitrogen facility.
The Kenai litigation settlement resolved our long-standing dispute with Union Oil Company of California (Unocal) over obligations under the Purchase and Sales Agreement, associated Earn-out obligations and gas supply issues. The settlement agreement establishes a definitive gas supply obligation from Unocal to the Kenai facility up until October 31, 2005, with significant remedies for non-performance. Agrium intends to close the Kenai facility in November of 2005 unless alternate economic gas supplies can be obtained.
For the year, consolidated net earnings were $276-million, or $1.91 diluted earnings per share. This is a $297-million improvement over the prior year consolidated net loss of $21-million or $0.25 diluted loss per share. The 2003 year included a $140-million after-tax asset impairment on our Kenai operations, while the 2004 results included $86-million ($52-million after-tax) Kenai award and settlement. Excluding all Kenai related items in both years, net earnings would have been $224-million, or $1.56 diluted earnings per share in 2004 compared to $119-million, or $0.82 diluted earnings per share in 2003.
The growth in both quarterly and full year net earnings is largely attributed to Wholesale operations in both North and South America, which have benefited from the tight supply and demand fertilizer market fundamentals.
Cash Provided by Operating Activities
Operating activities provided cash of $191-million in the fourth quarter of 2004 compared $70-million for the same quarter of 2003. The increase of $121-million is due to improved earnings and the Kenai award and settlement.
Financial Position
Cash balances increased $225-million to end the year at $425-million, largely attributable to cash provided by operating activities.
Consolidated inventories have increased by $79-million compared to the prior year. The majority of this increase is comprised of an additional 175-thousand tonnes of ammonia inventory resulting from the late harvest and early winter in Western Canada and the northern plains. Lower application rates in the fall 2004 season should result in strong application demand in the 2005 spring season.
Other liabilities are up largely due to shutdown costs accrued for the intended closure of the Kenai, Alaska nitrogen facility in November 2005.
BUSINESS SEGMENT PERFORMANCE
Retail
- In the fourth quarter of 2004, we integrated our North and South America Retail segments into one Retail segment. The change was a reflection of organizational and operational changes that aligned and integrated our South America Retail segment with North America Retail.
- Fourth quarter 2004 Retail EBIT was up $11-million over the same period last year. The increase is attributable to both growth in fertilizer sales prices and volumes.
- Lower expenses relative to liability claims and accounts receivable write-offs also contributed to the EBIT increase.
North America Wholesale
- Wholesale EBIT for the fourth quarter of 2004 was $140-million, up $313-million from a negative EBIT of $173-million for the same period last year. Excluding Kenai related items from both years, Wholesale EBIT for the fourth quarter was $95-million in 2004 and $62-million in 2003.
- Gross profit in the fourth quarter of 2004 was up by $41-million over the same quarter last year, with increased margin per tonne in every product category. In the quarter, Potash experienced the largest increase in gross profit of $17-million, primarily due to higher prices. The growth in Potash earnings is a reflection of continued tight supply/demand balance, both internationally and in North America. Phosphate gross margins were up $11-million due to higher prices for Monoammonium Phosphate (MAP) driven by higher ammonia prices. Total nitrogen increase in gross profit of $13-million was largely attributed to a $21-million growth in urea gross profit, a reflection of tight supply/demand fundamentals both internationally and in North America. This was partially offset by a $13-million decrease in ammonia gross profit comprised of lower demand due to poor weather conditions in North America and increased cost of product attributable to higher gas costs.
- Expenses (income) in the fourth quarter of 2004 include $45-million of Kenai related income, comprised of liquidated damages from the Arbitration Panel award and a gain from the settlement of litigation. The prior year fourth quarter includes a Kenai asset impairment pre-tax expense of $235-million. Excluding all Kenai related items from both years, expenses (income) for Wholesale were up by $8-million in the fourth quarter of 2004 compared to the same period of 2003, largely relating to Kenai Earn-out accrued prior to our settlement with Unocal in December, 2004.
South America Wholesale
- Wholesale EBIT was $23-million and gross profit was $28-million for the fourth quarter in 2004, up $7-million and $6-million respectively from the same period last year. The increase is primarily attributable to higher urea international prices which impacted both domestic and export selling prices, consistent with tightened supply/demand balance.
Other
- EBIT for our Other non-operating business segment for the fourth quarter of 2004 was up $5-million over the same period last year. This increase is largely related to foreign exchange gains on the translation of U.S. dollar working capital in our Canadian parent company.
SELECTED QUARTERLY INFORMATION
(Unaudited, in millions of U.S. dollars,
except per share information)
2004 2003
-------------------------------------------------------
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
-------------------------------------------------------
Net sales 720 672 1,011 435 637 561 929 372
Gross Profit 254 231 283 142 204 172 252 111
Net earnings
(loss) 102 87 75 12 (109) 25 69 (6)
Earnings
(loss) per
share
-basic 0.76 0.65 0.56 0.07 (0.89) 0.18 0.53 (0.07)
-diluted 0.71 0.60 0.52 0.07 (0.89) 0.17 0.47 (0.07)
The fertilizer business is seasonal in nature. Consequently, quarter-to-quarter results are not directly comparable.
NON-GAAP MEASURES
In the discussion of our performance for the quarter, in addition to the primary measures of earnings and earnings per share, we make reference to EBIT (earnings before interest expense and income taxes) and EBITDA (earnings before interest expense, income taxes, depreciation, amortization and asset impairment). We consider EBIT and EBITDA to be useful measures of performance because income tax jurisdictions and business segments are not synonymous, and we believe that allocation of income tax charges distorts the comparability of historical performance for the different business segments. Similarly, financing and related interest charges cannot be allocated to all business segments on a basis that is meaningful for comparison with other companies. EBIT and EBITDA measures are also used extensively in the covenants relating to our financing arrangements.
EBIT and EBITDA are not recognized measures under GAAP, and our method of calculation may not be comparable to other companies. EBIT should therefore not be used as an alternative to net earnings (loss) determined in accordance with GAAP as an indicator of our performance. Similarly, EBITDA should not be used as an alternative to cash provided by (used in) operating activities as determined in accordance with GAAP.
KEY RISKS AND UNCERTAINTIES
Looking Forward to the First Half of 2005
As Agrium looks forward to the First Half of 2005, there are a number of factors that may positively impact our future results:
- In 2004, above average Canadian grain production and record U.S. corn and soybean production increased soil nutrient removal and boosted U.S. farm income to record high levels.
- Western Canadian moisture conditions are significantly improved compared to this time last year. In addition, fall application in Western Canada and several regions of the U.S. was cut short in 2004 as a result of weather-related constraints. These factors should support strong nutrient demand during the upcoming spring season.
- North American potash inventories are down as of December 2004 compared to December 2003. For urea, the pace of offshore imports has significantly lagged behind last year, while producer inventories remain similar on a year-over-year basis.
- The Chinese government has announced the elimination of the 11 percent Value Added Tax rebate on Chinese urea exports and imposed the equivalent of a $31.50 per tonne tax on Chinese exports effective January 1, 2005. Both measures should limit Chinese urea exports.
- The recent finding of Asian rust in the U.S. could support more corn and cotton acreage at the expense of soybeans. This would be positive for fertilizer use, especially nitrogen. Asian rust also has the potential to increase chemical application on soybeans, which would be positive for chemical revenues in our U.S. retail operations.
Offsetting these positive indicators are some negative factors that may adversely impact future results:
- North American crop prices are lower than last year at this time due to the significant increase in global and U.S. grain and oilseed production during 2004. Despite this increased production, global grain stocks remain well below historical levels.
- International ammonia prices declined in January 2005 in part due to a build up of supplies in key exporting regions.
- North American producer inventories of phosphate and ammonia were higher as of December 2004 compared to December 2003.
- High and volatile North American natural gas prices could negatively impact North America Wholesale's margins.
- The Canadian dollar remains strong relative to the U.S. dollar, which negatively impacts Agrium's Canadian dollar-denominated costs.
OTHER
Agrium Inc. is a leading global producer and marketer of agricultural nutrients and industrial products and a major retail supplier of agricultural products and services in both North and South America. Agrium produces and markets three primary groups of nutrients: nitrogen, phosphate and potash as well as micronutrients. Agrium's strategy is to grow through incremental expansion of its existing operations and acquisitions as well as the development, commercialization and marketing of new products and international opportunities.
Certain statements in this press release constitute forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties, including those referred to in the management discussion and analysis section of the Corporation's most recent annual report to shareholders, which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. A number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, weather conditions, the future supply, demand, price level and volatility of natural gas, future prices of nitrogen, phosphate and potash, the differential pricing of natural gas in various markets, the future gas prices and availability at Kenai, the exchange rates for U.S., Canadian, Argentine, and Chilean currencies, South American government policy, South American domestic fertilizer consumption, future fertilizer inventory levels, future nitrogen, potassium and phosphate consumption in North America, future crop prices, future levels of nitrogen imports into North America and future additional fertilizer capacity and operating rates. Agrium disclaims any intention or obligation to update or revise any forward-looking information as a result of new information or future events.
A WEBSITE SIMULCAST of the 2004 4th Quarter Conference Call will be available in a listen-only mode beginning Thursday, February 10th 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 and Retained Earnings
(Millions of U.S. dollars, except per share information)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------------------------------
2004 2003 2004 2003
------------------------------------------
Sales $ 766 $ 677 $ 3,001 $ 2,630
Direct freight 46 40 163 131
------------------------------------------
Net sales 720 637 2,838 2,499
Cost of product 466 433 1,928 1,760
------------------------------------------
Gross profit 254 204 910 739
------------------------------------------
Expenses (income)
Selling, general and
administrative 83 82 301 286
Depreciation and amortization 39 39 156 140
Kenai award and settlement
(note 2) (45) - (86) -
Asset impairment - 235 - 235
Royalties and other taxes 6 4 29 17
Other expenses 3 12 43 40
------------------------------------------
86 372 443 718
------------------------------------------
Earnings (loss) before interest
expense and income taxes 168 (168) 467 21
Interest on long-term debt 13 14 51 58
Other interest 3 1 4 5
------------------------------------------
Earnings (loss) before
income taxes 152 (183) 412 (42)
------------------------------------------
Current income taxes
(recovery) 24 (13) 99 22
Future income taxes
(reduction) 26 (61) 37 (43)
------------------------------------------
Income taxes 50 (74) 136 (21)
------------------------------------------
Net earnings (loss) 102 (109) 276 (21)
Retained earnings
- beginning of period 305 264 145 191
Common share dividends
declared (7) (7) (14) (14)
Preferred securities
charges (2) (3) (9) (11)
------------------------------------------
Retained earnings - end of
period $ 398 $ 145 $ 398 $ 145
------------------------------------------
------------------------------------------
Earnings (loss) per share
(note 7)
Basic $ 0.76 $ (0.89) $ 2.04 $ (0.25)
Diluted $ 0.71 $ (0.89) $ 1.91 $ (0.25)
AGRIUM INC.
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------------------------------
2004 2003 2004 2003
------------------------------------------
Operating
Net earnings (loss) $ 102 $ (109) $ 276 $ (21)
Items not affecting cash
Depreciation and
amortization 39 39 156 140
Asset impairment - 235 - 235
Kenai award and
settlement (note 2) (36) - (36) -
Proceeds on settlement
(note 2) 25 - 25 -
Gain on disposal of assets (4) - (6) (5)
Future income taxes
(reduction) 26 (61) 37 (43)
Foreign exchange (1) (3) (5) (8)
Net change in non-cash
working capital 39 (32) (8) (114)
Other operating 1 1 10 2
------------------------------------------
Cash provided by operating
activities 191 70 449 186
------------------------------------------
Investing
Capital expenditures (33) (32) (82) (99)
Decrease (increase) in
other assets (7) 5 (14) 3
Proceeds from disposal
of assets and
investments 7 - 10 12
Net change in non-cash
working capital - 8 - 26
Other 3 - 7 10
------------------------------------------
Cash used in investing
activities (30) (19) (79) (48)
------------------------------------------
Financing
Common shares 4 5 12 6
Bank indebtedness repayment (1) - - (1)
Long-term debt repayment (36) (24) (134) (27)
Common share dividends paid - - (14) (14)
Preferred securities
charges paid (2) (3) (9) (11)
------------------------------------------
Cash used in financing
activities (35) (22) (145) (47)
------------------------------------------
Increase in cash and cash
equivalents 126 29 225 91
Cash and cash equivalents -
beginning of period 299 171 200 109
------------------------------------------
Cash and cash equivalents -
end of period $ 425 $ 200 $ 425 $ 200
------------------------------------------
------------------------------------------
AGRIUM INC.
Consolidated Balance Sheet
(Millions of U.S. dollars)
(Unaudited)
As at
December 31,
2004 2003
------------------------
ASSETS
Current assets
Cash and cash equivalents $ 425 $ 200
Accounts receivable 388 314
Inventories 447 368
Prepaid expenses 56 60
------------------------
1,316 942
Capital assets 1,239 1,260
Other assets 77 71
Future income tax assets 24 -
------------------------
$ 2,656 $ 2,273
------------------------
------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 472 $ 404
Current portion of long-term debt 60 121
------------------------
532 525
Long-term debt
Recourse debt 471 503
Non-recourse debt 69 111
------------------------
540 614
Other liabilities 257 181
Future income tax liabilities 201 132
------------------------
1,530 1,452
------------------------
Shareholders' equity
Share capital
Authorized: unlimited common shares
and preferred securities
Issued:
Common shares: 2004 - 132-million
(2003 - 127-million) 553 490
Preferred securities:
8% Redeemable: 2004 - seven million
(2003 - seven million) (note 5) 172 172
6% Convertible, redeemable: 2004 - nil
(2003 - two million) (note 5) - 50
Contributed surplus 2 1
Retained earnings 398 145
Cumulative translation adjustment 1 (37)
------------------------
1,126 821
------------------------
$ 2,656 $ 2,273
------------------------
------------------------
AGRIUM INC.
Summarized Notes to the Consolidated Financial Statements
For the twelve months ended December 31, 2004
(Millions of U.S. dollars, except per share amounts)
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The Corporation's accounting policies are in accordance with accounting principles generally accepted in Canada and are consistent with those outlined in the annual audited financial statements except where stated below. These interim consolidated financial statements do not include all disclosures normally provided in annual financial statements and should be read in conjunction with the Corporation's audited consolidated financial statements for the year ended December 31, 2003. In management's opinion, the interim consolidated financial statements include all adjustments necessary to present fairly such information.
Certain comparative figures have been reclassified to conform to the current year's presentation.
2. KENAI AWARD AND SETTLEMENT
The following amounts were recorded during 2004 relating to the arbitration award and settlement of legal claims in our dispute with Union Oil Company of California (Unocal):
2004
---------------------------------------------
Three months ended Twelve months ended
December 31 December 31
---------------------------------------------
Arbitration award (a) $ 9 $ 50
Settlement of legal
claims (b) 36 36
---------------------------------------------
$ 45 $ 86
---------------------------------------------
---------------------------------------------
(a) Arbitration award
During 2004, the Corporation was awarded liquidated damages with respect to a dispute with Unocal over gas supply obligations to our Kenai, Alaska nitrogen facility. The Arbitration Panel awarded the Corporation $37-million plus interest for damages up to April 2004. An additional $4-million was received for the period May to September 2004 and $9-million for the period October to December 2004. The total liquidated damages recorded for the year totaled $50-million.
(b) Settlement of legal claims
In December of 2004, the Corporation settled its dispute with Unocal over obligations under the Purchase and Sale Agreement, pursuant to which the Corporation acquired its Kenai, Alaska nitrogen facility. The settlement agreement establishes a definitive gas supply obligation from Unocal to the Kenai facility up until October 31, 2005.
The net gain of $36-million recorded in the fourth quarter of 2004 was comprised of the following:
Three and twelve
months ended
December 31
-------------------
2004
-------------------
Net cash received $ 25
Earn-out adjustment (2001 - 2004) 81
Adjustments related to termination of gas supply (70)
-------------------
Net gain $ 36
-------------------
-------------------
3. BANK INDEBTEDNESS
In May 2004, Agrium Inc. and its wholly owned subsidiary, Agrium U.S. Inc., entered into a $450-million three-year syndicated revolving unsecured credit facility. The new credit agreement replaced Agrium Inc.'s $225-million credit facility due in May 2004 and Agrium U.S. Inc.'s $56-million credit facility due in December 2004.
Under the terms of the agreement, Agrium Inc. and Agrium U.S. Inc. may borrow a maximum principal amount of $325-million and $125-million respectively. Interest rates are at either Canadian prime rate plus a variable margin, U.S. base rate established by a bank plus a variable margin, LIBOR plus a variable margin or bankers' acceptance rate plus a variable margin, at the election of the borrower.
The credit facility requires that Agrium Inc. maintain certain financial ratios and other covenants.
4. EMPLOYEE FUTURE BENEFITS
The total net employee future benefits expense for the Corporation's pension and post-retirement benefit plans are computed as follows:
Three months ended Twelve months ended
December 31, December 31,
---------------------------------------------
2004 2003 2004 2003
---------------------------------------------
Defined benefit pension
plans $ 4 $ 1 $ 10 $ 7
Post-retirement benefit
plans 3 2 7 5
Defined contribution
pension plans 3 3 11 10
---------------------------------------------
Total expense $ 10 $ 6 $ 28 $ 22
---------------------------------------------
---------------------------------------------
This expense is reflected in our cost of product and general and administrative expenses.
5. SHARE CAPITAL
In January 2005, the Corporation announced its intention to redeem the $175-million, eight percent redeemable preferred securities for cash on February 14, 2005. The redemption price will equal the principal amount of the securities plus accrued and unpaid interest to the date of redemption.
In January 2004, pursuant to the Corporation's plan to redeem the six percent preferred securities, all holders of the convertible, redeemable preferred securities elected to convert the securities into common shares at the stated conversion price of $11.9677 per share, resulting in the issuance of an additional 4.18 million common shares.
6. STOCK BASED COMPENSATION
The Corporation began prospectively expensing the fair value of stock options granted in 2003 over their vesting period. In accordance with the prospective method of adoption, the Corporation has recorded no compensation expense for stock options granted prior to January 1, 2003 and will continue to provide pro forma disclosure of the effect on net earnings (loss) and earnings (loss) per share had the fair value been expensed. The following table summarizes the pro forma disclosure for stock options granted prior to 2003 that have not been expensed.
Three months ended
December 31,
-------------------------------------------------
2004 2003
-------------------------------------------------
As Reported Pro forma As Reported Pro forma
-------------------------------------------------
-------------------------------------------------
Net earnings (loss) $ 102 $ 101 $ (109) $ (109)
Earnings (loss)
per share
Basic $ 0.76 $ 0.75 $ (0.89) $ (0.89)
Diluted $ 0.71 $ 0.70 $ (0.89) $ (0.89)
Twelve months ended
December 31,
-------------------------------------------------
2004 2003
-------------------------------------------------
As Reported Pro forma As Reported Pro forma
-------------------------------------------------
-------------------------------------------------
Net earnings (loss) $ 276 $ 272 $ (21) $ (26)
Earnings (loss)
per share
Basic $ 2.04 $ 2.01 $ (0.25) $ (0.29)
Diluted $ 1.91 $ 1.89 $ (0.25) $ (0.29)
7. EARNINGS (LOSS) PER SHARE
The following table summarizes the computation of net earnings (loss)
per share:
Three months ended Twelve months ended
December 31, December 31,
-----------------------------------------
2004 2003 2004 2003
-----------------------------------------
Numerator:
Net earnings (loss) $ 102 $ (109) $ 276 $ (21)
Preferred securities
charges (net of tax) (2) (3) (9) (11)
-----------------------------------------
Numerator for basic
earnings (loss) per share 100 (112) 267 (32)
-----------------------------------------
-----------------------------------------
Preferred securities
charges (net of tax) (a) 2 - 9 -
-----------------------------------------
Numerator for diluted
earnings (loss) per share $ 102 $ (112) $ 276 $ (32)
-----------------------------------------
-----------------------------------------
Denominator:
Weighted average
denominator for basic
earnings (loss) per share 132 126 131 126
-----------------------------------------
-----------------------------------------
Dilutive instruments:
Stock options (a) 2 - 1 -
Preferred securities
converted to common
shares
$175-million, eight
percent (a) 10 - 12 -
$50-million, six percent
(note 5)(a) - - - -
-----------------------------------------
Denominator for diluted
earnings per share 144 126 144 126
-----------------------------------------
-----------------------------------------
Basic earnings (loss)
per share $ 0.76 $ (0.89) $ 2.04 $ (0.25)
Diluted earnings (loss)
per share $ 0.71 $ (0.89) $ 1.91 $ (0.25)
(a) For diluted earnings per share, these dilutive instruments are
added back only when the impact of the instrument is dilutive
to basic earnings per share.
There were 132 million common shares outstanding at December 31, 2004 (2003 - 127 million). As at December 31, 2004, the Corporation has outstanding approximately eight million options to acquire common shares.
8. SEASONALITY
The fertilizer business is seasonal in nature. Sales are concentrated in the spring and fall planting seasons while produced inventories are accumulated throughout the year. Cash collections generally occur after the planting seasons in North and South America.
9. SEGMENTED INFORMATION
The Corporation's primary activity is the production and wholesale marketing of nitrogen, potash and phosphate and the retail sales of fertilizers, chemicals and other agricultural inputs and services. The Corporation operates principally in Canada, the United States and Argentina.
Net sales between segments are accounted for at prices, which approximate fair market value and are eliminated on consolidation. The reportable segment entitled "Other" includes Corporate functions and inter-segment eliminations.
In the fourth quarter of 2004, we integrated our North and South America Retail segments into one Retail segment. Prior periods have been restated for comparative purposes.
Schedule 1
AGRIUM INC.
Segmentation
(unaudited - millions of U.S. dollars)
Three Months Ended December 31
-----------------------------------------------------
Wholesale
---------------------------------
Retail North America South America
2004 2003 2004 2003 2004 2003
-----------------------------------------------------
Net sales
- external $ 219 $ 206 $ 464 $ 401 $ 37 $ 30
- inter-segment - - 36 29 2 1
-----------------------------------------------------
Total net sales 219 206 500 430 39 31
Cost of product 146 135 349 320 11 9
-----------------------------------------------------
Gross profit 73 71 151 110 28 22
Gross profit % 33% 34% 30% 26% 72% 71%
-----------------------------------------------------
-----------------------------------------------------
Selling Expenses $ 58 $ 61 $ 5 $ 4 $ - $ -
EBITDA (1) $ 21 $ 11 $ 169 $ 91 $ 27 $ 20
EBIT (2) $ 17 $ 6 $ 140 $ (173) $ 23 $ 16
Three Months Ended December 31
-----------------------------------------------------
Other Total
-----------------------------------------------------
2004 2003 2004 2003
-----------------------------------------------------
Net sales
- external $ - $ - $ 720 $ 637
- inter-segment (38) (30) - -
-----------------------------------------------------
Total net sales (38) (30) 720 637
Cost of product (40) (31) 466 433
-----------------------------------------------------
Gross profit 2 1 254 204
Gross profit % 5% 3% 35% 32%
-----------------------------------------------------
-----------------------------------------------------
Selling Expenses $ (1) $ (2) $ 62 $ 63
EBITDA (1) $ (10) $ (16) $ 207 $ 106
EBIT (2) $ (12) $ (17) $ 168 $ (168)
Twelve Months Ended December 31
-----------------------------------------------------
Wholesale
---------------------------------
Retail North America South America
2004 2003 2004 2003 2004 2003
-----------------------------------------------------
Net sales
- external $ 1,114 $ 1,015 $ 1,594 $ 1,377 $ 130 $ 107
- inter-segment - - 109 88 13 9
-----------------------------------------------------
Total net sales 1,114 1,015 1,703 1,465 143 116
Cost of product 798 717 1,211 1,106 41 34
-----------------------------------------------------
Gross profit 316 298 492 359 102 82
Gross profit % 28% 29% 29% 25% 71% 71%
-----------------------------------------------------
-----------------------------------------------------
Selling Expenses $ 222 $ 214 $ 17 $ 15 $ 1 $ 1
EBITDA (2) $ 99 $ 85 $ 465 $ 285 $ 98 $ 78
EBIT (1) $ 81 $ 66 $ 349 $ (49) $ 83 $ 63
Twelve Months Ended December 31
-----------------------------------------------------
Other Total
-----------------------------------------------------
2004 2003 2004 2003
-----------------------------------------------------
Net sales
- external $ - $ - $ 2,838 $ 2,499
- inter-segment (122) (97) - -
-----------------------------------------------------
Total net sales (122) (97) 2,838 2,499
Cost of product (122) (97) 1,928 1,760
-----------------------------------------------------
Gross profit - - 910 739
Gross profit % 0% 0% 32% 30%
-----------------------------------------------------
-----------------------------------------------------
Selling Expenses $ (3) $ (3) $ 237 $ 227
EBITDA (2) $ (39) $ (52) $ 623 $ 396
EBIT (1) $ (46) $ (59) $ 467 $ 21
(1) Earnings (loss) before interest expense, income taxes,
depreciation, amortization and asset impairment.
(2) Earnings (loss) before interest expense and income taxes.
AGRIUM INC.
Product Lines
Three Months Ended December 31
(unaudited - millions of U.S. dollars)
2004
---------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------
North America Wholesale
Nitrogen (1)
Ammonia $ 100 $ 24 325 $ 308 $ 74
Urea 166 53 649 256 82
Nitrate, Sulphate
and Other 71 17 352 202 48
---------------------------------------------
Total Nitrogen 337 94 1,326 254 71
Phosphate 101 23 370 273 62
Potash (2) 62 34 464 134 73
---------------------------------------------
500 151 2,160 231 70
South America
Wholesale (1) 39 28 149 262 188
Retail (3)
Fertilizers 131 28
Chemicals 62 32
Other 26 13
---------------
219 73
Inter-segment (38) 2
---------------
Total $ 720 $ 254
---------------
2003
---------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------
North America Wholesale
Nitrogen (1)
Ammonia $ 130 $ 37 485 $ 268 $ 76
Urea 123 32 623 197 51
Nitrate, Sulphate
and Other 59 12 358 165 34
---------------------------------------------
Total Nitrogen 312 81 1,466 213 55
Phosphate 74 12 313 236 38
Potash (2) 44 17 436 101 39
---------------------------------------------
430 110 2,215 194 50
South America
Wholesale (1) 31 22 160 194 138
Retail (3)
Fertilizers 120 26
Chemicals 61 32
Other 25 13
---------------
206 71
Inter-segment (30) 1
---------------
Total $ 637 $ 204
---------------
(1) International nitrogen sales were 437,000 tonnes (2003 - 500,000)
net sales were $110-million (2003 - $90-million) and gross profit
was $62-million (2003 - $47-million) for the three months ended
December 31.
(2) International potash sales were 200,000 tonnes (2003 - 138,000)
net sales were $22-million (2003 - $10-million) and gross profit
was $14-million (2003 - $5-million) for the three months ended
December 31.
(3) International Retail net sales were $37-million (2003 -
$30-million) and gross profit was $5-million (2003 - $7-million)
for the three months ended December 31.
AGRIUM INC.
Product Lines
Twelve Months Ended December 31
(unaudited - millions of U.S. dollars)
2004
---------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------
North America Wholesale
Nitrogen (1)
Ammonia $ 397 $ 113 1,438 $ 276 $ 79
Urea 499 134 2,211 226 61
Nitrate, Sulphate
and Other 284 68 1,510 189 45
---------------------------------------------
Total Nitrogen 1,180 315 5,159 229 61
Phosphate 309 71 1,181 262 60
Potash (2) 214 106 1,796 119 59
---------------------------------------------
1,703 492 8,136 209 60
South America
Wholesale (1) 143 102 634 226 161
Retail (3)
Fertilizers 556 131
Chemicals 416 118
Other 142 67
---------------
1,114 316
Inter-segment (122) -
---------------
Total $2,838 $ 910
---------------
2003
---------------------------------------------
Sales Selling
Net Gross Tonnes Price Margin
Sales Profit (000's) ($/Tonne) ($/Tonne)
---------------------------------------------
North America Wholesale
Nitrogen (1)
Ammonia $ 382 $ 96 1,555 $ 246 $ 62
Urea 423 100 2,220 191 45
Nitrate, Sulphate
and Other 239 58 1,381 173 42
---------------------------------------------
Total Nitrogen 1,044 254 5,156 202 49
Phosphate 261 44 1,090 239 40
Potash (2) 160 61 1,662 96 37
---------------------------------------------
1,465 359 7,908 185 45
South America
Wholesale (1) 116 82 653 178 126
Retail (3)
Fertilizers 468 117
Chemicals 416 119
Other 131 62
---------------
1,015 298
Inter-segment (97) -
---------------
Total $2,499 $ 739
---------------
(1) International nitrogen sales were 1,881,000 tonnes (2003 -
1,991,000) net sales were $393-million (2003 - $319-million)
and gross profit was $206-million (2003 - $155- million) for
twelve months ended December 31.
(2) International potash sales were 730,000 tonnes (2003 - 570,000)
net sales were $71-million (2003 - $43-million) and gross profit
was $42-million (2003 - $22-million) for twelve months ended
December 31.
(3) International Retail net sales were $118-million (2003 -
$92-million) and gross profit was $22-million (2003 -
$17-million) for twelve months ended December 31.
AGRIUM INC. (TSX:AGU) (NYSE:AGU)
CONTACT: Agrium Inc.
Richard Downey
Director, Investor Relations
(403) 225-7357
OR
Agrium Inc.
Christine Gillespie
Investor Relations Manager
(403) 225-7437
Fax: (403) 225-7609
Website: www.agrium.com
SOURCE: AGRIUM INC.
