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Agrium Successful in Expanding Retail Gross Margins in 3Q16

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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.

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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.

Notably, the VanEck Vectors Agribusiness ETF (MOO) invests 7.7% in Monsanto (MON), 3.8% in Agrium (AGU), 4.6% in PotashCorp (POT), and 8.9% in Syngenta (SYT).

Now let’s take a closer look at Agrium’s Wholesale segment.

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