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How Agrium Fared in 2Q17 amid Weak Price Environment

PART:
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Part 3
How Agrium Fared in 2Q17 amid Weak Price Environment PART 3 OF 4

Agrium Sees Same Price Realization Trend as Peers

Price realization

In the earlier part of this series, we discussed how Agrium’s (AGU) shipments remained almost unchanged year-over-year yet the company’s sales saw a decline during the quarter. Lower price realization for the company’s products continued to be the leading driver for the sales decline. This has also been the story for other fertilizer players (MXI) including PotashCorp (POT), Mosaic (MOS), and CF Industries (CF).

Agrium Sees Same Price Realization Trend as Peers

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Price realizations

In 2Q17, Agrium’s retail segment’s price realizations took the worst hit. Overall, the company’s retail segment’s prices fell 10% year-over-year to $406 per ton from $453 per ton a year ago in 2Q16. Note that this applies only to the crop nutrient sub-segment under the retail segment for Agrium.

So, the above chart and the chart in the earlier series do not completely represent the retail segment’s sales performance. Perhaps the best indicator for the retail segment for Agrium, just like any other retail business, would be same-store-sales growth.

Agrium reports its same-store sales growth performance every other quarter. In 2Q17, the company’s same-store-sales fell by as much as 5% year-over-year. The 2Q17 quarter marks the ninth consecutive quarter with negative same-store-sales growth for the company.

Negative same-store-sales growth usually means that the company’s combined stores have had lower sales compared to the same quarter a year ago. Same-store sales for companies are usually driven by price, volumes, and product mix. Agrium’s year-over-year decline is most likely the result of lower price realizations.

Wholesale prices

Similar to other major fertilizer companies, Agrium’s price realization for its wholesale segment also took a beating in 2Q17. Overall, the company’s prices fell 4% year-over-year to $308 per ton from $322 per ton.

Under the wholesale segment, the phosphate prices had the worst quarter with average prices falling by as much as 6% year-over-year. The nitrogen segment’s prices fell by as much as 4.3% year-over-year. In contrast, potash prices were 8% higher year-over-year.

Next, we’ll discuss margins for the company.

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