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How Agrium’s Margins Fared in 1Q17

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Agrium’s profitability

In the earlier parts of this series, we discussed Agrium’s (AGU) shipments and realized prices in 1Q17. While fertilizer companies (MOO) such as Agrium, PotashCorp (POT), CF Industries (CF), and Terra Nitrogen (TNH) have little control over market prices, they do have some control over costs to protect their profitability. In this article, we’ll discuss Agrium’s margins.

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Margins

During 1Q17, Agrium experienced a slight expansion in gross margins from 20% in 1Q16 to 21% in 1Q17. The expansion in the company’s gross margin comes on the back of a year-over-year fall in sales in 1Q17 for reasons we discussed earlier. Thus, the company’s margins expanded as a result of cost optimization in production.

Much of the growth in margins has come from the retail segment where the company’s per ton margin has expanded from $68 per ton to $77 per ton year-over-year. For the wholesale segment, the per ton margin contracted from $79 per ton to $63 per ton year-over-year.

There was an increase in the company’s EBITDA (earnings before interest, tax, depreciation, and amortization) margins year-over-year from 7.6% to 9% in 1Q17. However, these rises failed to translate into net margin growth. Net margins were -0.4% compared to 0.1% year-over-year as a result of a loss per share in 1Q17.

For more industry updates, visit Market Realist’s Agricultural Fertilizers page.

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