Retail gross margins
Previously in this series, we discussed how Agrium’s (AGU) Retail segment performed in 3Q16 and how its overall realized prices fell 17% YoY (year-over-year), though shipments rose 4% YoY. Remember, shipments and prices are both driven by market forces—something a company has little control over—and so it’s important for us to observe how gross margins for fertilizer companies have fared.
Gross margins across Retail’s sub-segments
In 3Q16, the Retail segment’s gross margin expanded YoY to 26% from 25% in 3Q15. Despite the fall in fertilizer prices, the segment’s gross margin expanded from 19% in 3Q15 to 24% in 3Q16, though the gross margin in crop protection did not change much YoY at 23%.
By comparison, the service and other sub-segment saw its margin expand from 59% to 63% in 3Q16, while the merchandise sub-segment saw its margin expand from 15% to 17%. Agrium’s seeds business saw its margin contract from 43% to 37% YoY.
Now let’s take a closer look at Agrium’s Wholesale segment.