Agrium -- Q1 Interim Report; Agrium Anticipates Good Spring Season.CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta--(BUSINESS WIRE)--April 27, 1999-- ALL AMOUNTS ARE STATED IN US$ Agrium Agrium Inc. NYSE: AGU TSX: AGU engages in the production, marketing, and distribution of agricultural products and services, and nutrients for agricultural and industrial markets in the United States and Argentina. Inc. (NYSE NYSE See: New York Stock Exchange :AGU AGU Aoyama Gakuin University, Tokyo, Japan AGU American Geophysical Union AGU Arabian Gulf University (Bahrain) AGU All Grown Up (TV show) AGU Aguascalientes, Aguascalientes, Mexico )(TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :AGU) announced today that its unaudited net earnings for the first quarter of 1999 were $1 million (loss of $0.01 per share after deducting preferred securities charges) compared to the first quarter 1998 earnings of $5 million (earnings of $0.04 per share). Cash provided by operating activities, before changes in non- non- word element [L.]not . non- pref. Not: noninvasive. cash working capital, for the first quarter of 1999 was $21 million ($0.16 per share), compared to $22 million ($0.17 per share) in 1998. "The first quarter results are generally dependent upon whether or not the weather in our various US markets allows an earlier than normal start to spring planting and are not indicative indicative: see mood. of farmers' intentions. However, despite the downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. in the current nitrogen nitrogen (nī`trəjən), gaseous chemical element; symbol N; at. no. 7; at. wt. 14.0067; m.p. −209.86°C;; b.p. −195.8°C;; density 1.25 grams per liter at STP; valence principally −3, +3, or +5. pricing environment, our Wholesale margins continue to remain strong due to our low-cost position. Our earnings have out-performed both our own expectations and consensus estimates from the financial community. Demand is strong for all products as we enter the peak spring season and our plants continue to operate at maximum capacity. Accordingly, we are anticipating a good spring season with farmers planting similar acreage compared to the near record levels farmed last year," said John Van Brunt brunt n. 1. The main impact or force, as of an attack. 2. The main burden: bore the brunt of the household chores. , Agrium President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "In our ongoing efforts to reduce general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. , we are very pleased to report a significant reduction in these costs this quarter compared to the same period last year. We are expecting more savings in this area in the future as our in-depth in-depth adj. Detailed; thorough: an in-depth study. in-depth Adjective detailed or thorough: an in-depth analysis review and analysis of all selling, general and administrative expenses on a company-wide basis continues. Our initial review has identified sustainable annual savings of between $15 to $20 million and we will start to see the majority of these savings commencing in the second half of this year," added John Van Brunt. RESULTS OF OPERATIONS The Corporation's results from operations, in millions of US dollars, were as follows: -0-
Three months ended March 31
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1999 1998
--------------------- ---------------------
Net Gross Net Gross
Sales Profit EBIT(x) Sales Profit EBIT(x)
--------------------- ---------------------
Wholesale $196 $57 $33 $192 $71 $45
Retail 104 30 (12) 108 30 (15)
Eliminations and
Other (10) 2 (10) (5) (1) (12)
--------------------- ---------------------
$290 $89 $11 $295 $100 $18
--------------------- ---------------------
--------------------- ---------------------
(x) Earnings before interest expense and income taxes
-0- With the majority of fertilizer fertilizer, organic or inorganic material containing one or more of the nutrients—mainly nitrogen, phosphorus, and potassium, and other essential elements required for plant growth. application in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. occurring in the spring and fall, 1st quarter earnings at both the Wholesale and Retail level typically reflect low, off-season demand. The Corporation's Wholesale sales in the first quarter of 1999 increased compared to the same period in 1998, primarily due to higher phosphate phosphate, salt or ester of phosphoric acid, H3PO4. Because phosphoric acid is tribasic (having three replaceable hydrogen atoms), it forms monophosphate, diphosphate, and triphosphate salts in which one, two, or three of the hydrogens of the sales volumes which were partially offset by lower sales volumes for nitrogen products. However, Wholesale gross profit and EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). decreased primarily due to lower nitrogen selling prices. Retail sales for the first quarter were lower than 1998 levels, primarily due to abnormally ab·nor·mal adj. Not typical, usual, or regular; not normal; deviant. [Alteration (influenced by ab-1) of obsolete anormal, from Medieval Latin wet conditions and poor commodity prices in the North-west Adv. 1. north-west - to, toward, or in the northwest nor'-west, northwest north-west n → noroeste m north-west north n → nord-ouest market. While gross profit remains unchanged from prior year first quarter, EBIT was higher due to higher interest income and lower depreciation and amortization expense. EBIT for Eliminations and Other in the first quarter 1999 was slightly higher than the same period in 1998 primarily due to a decrease in International and Corporate general and administrative expenses. WHOLESALE Selected Wholesale production and sales volumes, in thousands of tonnes, were as follows: -0-
Three months ended March 31
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1999 1998
----------------- -----------------
Production Sales Production Sales
----------------- -----------------
Nitrogen
Ammonia 342 199 304 180
Urea 499 335 455 407
Ammonium nitrate and
other products 113 107 114 115
---------------- -----------------
Total nitrogen 954 641 873 702
Phosphate(x) 288 287 301 174
Potash 419 364 461 343
Sulphate and other products 64 155 62 110
---------------- -----------------
1,725 1,447 1,697 1,329
---------------- -----------------
---------------- -----------------
(x) Phosphate production is comprised of 39 equivalent tonnes of
liquid phosphate and 249 tonnes of dry phosphate in 1999 (1998: 36 and
265 tonnes respectively); phosphate sales are comprised of 36
equivalent tonnes of liquid phosphate and 251 tonnes of dry phosphate
in 1999 (1998: 36 and 138 tonnes respectively).
-0- Wholesale sales and gross profit by product line, in millions of US dollars, were as follows: -0-
Three months ended March 31
----------------------------
1999 1998
--------------- ---------------
Net Gross Net Gross
Sales Profit Sales Profit
--------------- ---------------
Nitrogen $75 $17 $95 $36
Phosphate 68 17 46 14
Potash 37 18 36 16
Sulphate and other products 16 5 15 5
--------------- ---------------
$196 $57 $192 $71
--------------- ---------------
--------------- ---------------
-0- NITROGEN Nitrogen products' gross profit for the first quarter of 1999 amounted to $17 million, a decrease of $19 million (53 percent) over 1998 as a result of lower selling prices for all nitrogen products and lower sales volumes, particularly for urea and ammonium nitrate ammonium nitrate, chemical compound, NH4NO3, that exists as colorless, rhombohedral crystals at room temperature but changes to monoclinic crystals when heated above 32°C;. . PHOSPHATE Phosphate gross profit of $17 million for the first quarter of 1999 was higher than 1998 by $3 million (21 percent). The increase was primarily a result of significantly higher sales volumes. However, sales for the quarter include a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. sale of phosphate offshore at lower margins than in our normal market areas. POTASH potash: see potassium carbonate. potash Name used for various inorganic compounds of potassium, chiefly the carbonate (K2CO3), a white crystalline material formerly obtained from wood ashes. Potash gross profit of $18 million represents an increase of $2 million (13 percent) from 1998 due to higher offshore sales volumes and an increase in the Corporation's entitlement An individual's right to receive a value or benefit provided by law. Commonly recognized entitlements are benefits, such as those provided by Social Security or Workers' Compensation. of Canpotex sales for the first quarter of 1999 compared to 1998, the latter reflecting the benefit of our major expansion initiative completed in 1997. RETAIL North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. Retail sales for the first quarter of 1999 totalled $104 million and generated gross profit of $30 million. Despite lower net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight , gross profit remained unchanged while EBIT increased by $3 million from the same period in 1998. Selling, general and administrative expenses of $39 million for the quarter were also unchanged from 1998. FINANCIAL AND OTHER INFORMATION Working capital of $317 million at March 31, 1999 was almost the same as the prior year. The Corporation's 50 percent share of bank indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. in the Profertil nitrogen joint venture project was $68 million at March 31, 1999. Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. was virtually unchanged at $482 million or 40 percent of combined long-term debt and shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. . Cash provided by operations, before changes in non-cash working capital, of $21 million for the first quarter, 1999 was virtually unchanged from the prior year first quarter as the impact of lower earnings has been offset by a lower reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of non-cash taxes than in 1998. Overall general and administrative expenses of $8 million in the first quarter of 1999 have declined by 33 percent from the same period in 1998. The Corporation is continuing its joint review of selling, general and administrative expenses with an external consultant and anticipates a formal restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). to achieve significant cost savings and increased efficiency and effectiveness commencing in the second half of the year. The Corporation believes that at current prices, share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. continue to represent an attractive use of surplus cash. During the quarter, the Corporation repurchased 1.8 million shares at an average cost of $8.12 per share. This brings the total shares outstanding to 113 million shares, down significantly from the 140 million shares outstanding at the beginning of 1997. OUTLOOK During this spring season, the Corporation expects demand for all fertilizer products to be strong and it anticipates selling all the products it can produce other than potash where capacity exceeds anticipated demand. With the combination of low nitrogen prices and last year's unusually high crop yields resulting in a depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able of soil nutrients, it is expected that fertilizer application rates will remain strong this year. Seeded acreage in North America is expected to remain almost the same as last year which is positive for overall fertilizer demand in the region. It is expected that nitrogen prices will improve slightly during the second quarter over first quarter, 1999, but will be lower than second quarter, 1998. The second half, 1999 outlook for nitrogen prices is similar to the second half, 1998. Potash and phosphate prices are expected to remain relatively flat through the rest of the year. The development of the Corporation's Kapuskasing Kapuskasing (kăpəskā`sĭng), town (1991 pop. 10,344), central Ont., Canada, on the Kapuskasing River, N of Timmins. It has lumbering and pulp and paper mills, a cold-weather automotive testing center, and a large tourism industry. phosphate rock phosphate rock n. Any of various rocks composed largely of phosphate minerals, especially apatite, used as fertilizer and as a source of phosphorous compounds. mine is on schedule and on budget. Initial production will commence in July July: see month. , 1999 with full production expected in the fourth quarter of 1999. The mine will create a more secure, accessible and lower cost supply of raw material for the Corporation, with the latter resulting in approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $33 million in annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. savings commencing in the fourth quarter. Construction of the Profertil world-scale nitrogen production facility in Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. in which the Corporation has a 50 percent interest with YPF YPF Yacimientos Petrolíferos Fiscales (Argentina) YPF Esquimalt, British Columbia, Canada (Airport Code) YPF Young Peoples Fellowship S.A. is also on schedule and on budget. YEAR 2000 The Corporation's plans for addressing Year 2000 issues relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc information systems and overall operations are on schedule. All processes have been reviewed and remedial action A remedial action is a change made to a nonconforming product or service to address the deficiency. Rework and repair are generally the remedial actions taken on products, while services usually require additional services to be performed to ensure satisfaction. is in progress with completion still expected by the end of the second quarter of 1999. CORPORATE AND OTHER Agrium Inc. is a leading producer and marketer of fertilizer in North America and a major retail supplier of agricultural products and services in both North America and Argentina. The Corporation produces and markets four primary groups of fertilizers: nitrogen, phosphate, potash and sulphur Sulphur, city, United States Sulphur, city (1990 pop. 20,125), Calcasieu parish, SW La.; inc. 1914. It is a trade center for an area producing natural gas, oil, and timber as well as sorghum, soybeans, cattle, and crawfish. . The Corporation's strategy is to grow through incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Such forward-looking statements, including those referred to in the Corporation's annual report to shareholders for 1998, involve known and unknown risks, uncertainties and other factors 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, fluctuations in supply and demand in fertilizer, changes in gas costs, changes in capital markets, unexpected agricultural or environmental conditions and government policy changes. -0-
AGRIUM INC.
Consolidated Balance Sheets
(Millions of US dollars)
(Unaudited)
As at As at
March 31 December 31
--------------- --------------
1999 1998 1998
--------------- -------------
ASSETS
Current Assets
Cash and short-term investments $84 $8 $113
Accounts receivable 304 293 337
Income and other taxes recoverable - 13 -
Inventories 362 358 277
Prepaid expenses 38 33 22
--------------- -------------
788 705 749
Capital assets 994 905 951
Other assets 71 88 66
Goodwill 55 59 55
--------------- -------------
$1,908 $1,757 $1,821
--------------- -------------
--------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank indebtedness $68 $35 $28
Accounts payable and accrued
liabilities 390 352 287
Income taxes payable 13 - 59
Dividends payable - - 6
--------------- -------------
471 387 380
Long-term debt 482 483 482
Other liabilities 52 55 48
Future income taxes 189 203 188
--------------- -------------
1,194 1,128 1,098
--------------- -------------
Shareholders' Equity
Preferred securities 171 - 171
Common shares 353 388 359
Retained earnings 233 254 243
Cumulative translation adjustment (43) (13) (50)
--------------- -------------
714 629 723
--------------- -------------
$1,908 $1,757 $1,821
--------------- -------------
--------------- -------------
AGRIUM INC.
Consolidated Statements of Operations
(Millions of US dollars except per share information)
(Unaudited)
Three months ended
March 31
------------------
1999 1998
------------------
Net sales $290 $295
Cost of product 201 195
------------------
Gross profit 89 100
------------------
Expenses
Selling 45 45
General and administrative 8 12
Depreciation and amortization 22 22
Royalties, interest income and other 3 3
------------------
78 82
------------------
Earnings before interest expense and
income taxes 11 18
Interest on long-term debt 9 9
Other interest 1 1
Income taxes - 3
------------------
Net earnings for the period $1 $5
------------------
------------------
Basic earnings (loss) per common share ($0.01) $0.04
Average outstanding shares (in millions) 114 126
Fully diluted earnings (loss) per common
share ($0.01) $0.04
Average outstanding shares (in millions) 119 131
Shares outstanding at end of period
(in millions) 113 125
AGRIUM INC.
Consolidated Statements of Cash Flows
(Millions of US dollars)
(Unaudited)
Three months ended
March 31
------------------
1999 1998
------------------
Operating:
Net earnings for the period $1 $5
Depreciation and amortization 22 22
Future income taxes (2) (5)
-----------------
Cash provided by operating activities,
before changes in non-cash working capital 21 22
Net changes in non-cash working capital (8) 60
------------------
Cash provided by operating activities 13 82
------------------
Investing:
Capital assets (55) (28)
Other (4) (1)
------------------
Cash used in investing activities (59) (29)
------------------
Financing:
Common shares (15) (12)
Bank indebtedness 40 (34)
Long-term debt - (1)
Common share dividends paid (6) (7)
Preferred securities charges paid (2) -
------------------
Cash provided by (used in)
financing activities 17 (54)
------------------
Decrease in cash and short-term investments (29) (1)
Cash and short-term investments
- beginning of period 113 9
------------------
Cash and short-term investments
- end of period $84 $8
------------------
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