CALGARY – A drought in Western Canada and record rainfall in parts of the U.S. corn belt hit Agrium Inc.’s (TSX:AGU) retail sales this spring but the agricultural supplier still reported higher earnings thanks to lower production costs and higher wholesale returns.
The company’s adjusted net earnings from continuing operations were US$675 million for the second quarter, up from US$625 million for the same quarter last year. Earnings per share were US$4.90, up from US$4.34 per share last year.
The increased earnings came despite a US$346 million drop in sales to US$6.99 billion, with retail sales making up US$237 million of the decrease.
On a conference call with investors Thursday, company president and CEO Chuck Magro blamed the decline in sales on the weather.
“Weather conditions across North America were challenging, with record amounts of moisture across most of the southern corn belt and southeast U.S. in June, and a serious drought in Western Canada.”
He said the drought, which saw rain levels on average 40 per cent below normal in areas of Saskatchewan, Alberta and British Columbia, had the biggest impact on retail sales.
Farmers spent less on fertilizers and pesticides, as well as services, for struggling crops in the quarter as they tried to reduce losses. Canadian operations were also impacted by the lower Canadian dollar, cutting nutrient margins by US$10 per tonne.
But the company said the weather challenges in North America have driven crop prices higher, a trend it expects will encourage farmers to spend more money on improved crop yields. Still, crop prices are below the levels they were last year.
Agrium said its earnings were boosted especially by higher nitrogen returns, while costs were down thanks in part to lower natural gas prices.
Because of relatively low crop prices and lower than expected potash and phosphate pricing, the company reduced the top end of its 2015 guidance by US$0.75, now giving an earnings per share range of between US$7 and US$7.50.