In this part of the series, we will look at Agrium’s management outlook and guidance for 2016. Since investments are forward-looking, this article can help you assess Agrium’s prospects in more detail.
Agrium’s (AGU) management guidance for 2016 EPS (earnings per share) stands between $5.50–$7.00, which compares with its EPS of $7.25 in 2015. So, comparing with the top end of the guided range, year-over-year, the company’s management expects its EPS growth to decline.
While giving this guidance, the company’s management stated that its EPS guidance “takes into account, the significant pressure we have seen in nutrient prices over the past few months.” However, the company did state that it expects the nitrogen prices to improve in the coming months.
Some positives for 2016
For the exports and distribution of potash fertilizers, Agrium (AGU), along with Potash Corporation (POT) and the Mosaic Company (MOS), rely on Canpotex, a jointly owned logistics company. Each of these companies has an allocation in sales volume of Canpotex sales, which include sales of potash from all three companies. You may also access Agrium through the VanEck Vectors Agribusiness ETF (MOO), which invests 3.8% in Agrium and 8.9% in Syngenta (SYT).
During the quarter, Agrium’s allocation in Canpotex’s sales volume increased from 7.3% in 2014 to 10.3%. This would mean higher potash sales volume for Agrium in the coming year. On the back of this increased allocation, the company expects its potash sales volume to be ~2.5 million tons in 2016 from 1.7 million tons in 2015. The company stated that while it would be obligated to supply the 10.1% of the Canpotex allocation, it would still have enough product to supply.
Agrium (AGU) also expects positive environment for its Nitrogen segment’s pricing, which we discussed earlier in this series. We will look at the company’s expectations for 2016 in the next part of this series.