CALGARY, ALBERTA -- (Marketwire) -- 08/05/09 -- ALL AMOUNTS ARE STATED IN U.S.$
Agrium Inc. (TSX: AGU) (NYSE: AGU) announced today its second highest quarterly net earnings at $370-million ($2.35 diluted earnings per share) for the second quarter of 2009.
"Solid results from Retail, Advanced Technologies and our Wholesale nitrogen businesses resulted in Agrium achieving our second strongest quarterly net earnings in our history. We were able to do this despite the challenge of a short-term reduction in potash and phosphate application rates and Retail crop nutrient margins. The outlook for our businesses and products remains strong and we are starting to see signs of improving demand fundamentals as we approach the fall season. Our Retail crop protection and seed businesses in particular delivered excellent results and we ended the season with normal crop nutrient inventories in our Retail business. We continue to anticipate a recovery in potash demand later in the second half of 2009." said Mike Wilson, Agrium President and CEO.
With respect to Agrium's proposal to acquire CF Industries Holdings, Inc. ("CF"), Mr. Wilson stated "We remain fully committed to acquiring CF, with continued conviction that an Agrium and CF combination would create significant value for all stockholders and other stakeholders. We will continue to press CF to execute a mutually beneficial merger agreement despite the fact that CF has so far ignored a clear mandate from their stockholders' to conclude a transaction with us. Our offer remains far superior to any alternative articulated by CF, including remaining independent or paying a premium for Terra."
The 2009 second quarter results included gains of $15-million ($0.07 diluted earnings per share) on derivative financial instruments and a $4-million expense in stock-based compensation for the quarter. It also included an inventory write-down of $32-million (a $0.15 decrease in diluted earnings per share) primarily associated with our Wholesale purchase for resale business.
Similar to previous years, we intend to provide earnings guidance for the second half of the year when we release our third quarter results.
KEY RESULTS AND DEVELOPMENTS
- The strength of our crop protection and seed businesses was evident again this quarter providing excellent results for these product groups, jointly contributing $480-million in gross profit, 80 percent of Retail's total gross profit in the second quarter. Despite significantly reduced fertilizer rates and temporarily low crop nutrient margins we expect EBITDA from our Retail business to approximate $400-million in 2009.(1) Retail EBITDA of $307-million in the second quarter of 2009 was the second highest of any quarter, behind only last year's exceptional second quarter results. Despite crop nutrient use being well below normal, we moved through the majority of our high cost crop nutrient inventory position and did not incur any inventory write-down in our Retail business in 2009.
- Wholesale performance, for urea and ammonia products in particular, was strong this quarter with nitrogen contributing $182-million in gross profit, 86 percent of Wholesale's total gross profit. Equity earnings from our MOPCO Egyptian investment were an impressive $10-million this quarter. Potash margins were $377 per tonne but sales volumes were well below historical levels.
- Recent potash settlements in India have provided additional clarity to global potash prices and we anticipate demand to recover to normal levels in both our Retail and Wholesale businesses in the second half of 2009.(2) Agrium remains committed to our brownfield expansion and continues to evaluate greenfield opportunities.
(1) In the first quarter of 2009, a forward-looking statement indicated that 2009 Retail EBITDA was expected to be close to $0.5-billion. With lower realized fertilizer margin in the second quarter of 2009, our expectation for 2009 Retail EBITDA is updated to approximately $0.4-billion.
(2) See disclosure in the section "Outlook, Key Risks and Uncertainties" in our 2009 second quarter MD&A and additional assumptions in the section "Management's Discussion and Analysis".
MANAGEMENT'S DISCUSSION AND ANALYSIS
August 5, 2009
The following interim management's discussion and analysis (MD&A) updates our annual MD&A included in our 2008 Annual Report to Shareholders, to which our readers are referred. No update is provided where an item is not material or there has been no material change from the discussion in our annual MD&A.
2009 Second Quarter Operating Results
NET EARNINGS
Agrium's second quarter consolidated net earnings were $370-million, or $2.35 diluted earnings per share, compared to net earnings of $636-million, or $4.00 diluted earnings per share, for the same quarter of 2008. Consolidated net earnings for the first half of 2009 were $310-million, or $1.97 diluted earnings per share, compared to $831-million, or $5.24 diluted earnings per share, for the same period last year. Net earnings before interest expense and income taxes ("EBIT") were $543-million for the second quarter of 2009 compared with EBIT of $972-million for the second quarter of 2008. EBIT for the first half of 2009 was $487-million compared with EBIT of $1.3-billion for the first half of 2008. A reconciliation of EBIT to net earnings is provided in the section "Non-GAAP Measures". Consolidated gross profit in the second quarter of 2009 was $890-million, a $371-million decrease compared to $1.3-billion in the second quarter of 2008. Consolidated gross profit in the first half of 2009 was $1.2-billion, a $490-million decrease compared to $1.7-billion for the same period of 2008. The decreases in quarter-over-quarter and year-over-year EBIT and gross profit were primarily due to reduced potash sales volumes and lower selling prices for most products. For discussion on the performance of each business unit, see section "Business Segment Performance".
Expenses were $90-million higher in the second quarter and $332-million higher in the first half of 2009 compared to the same periods last year due primarily to significantly lower gains on derivative financial instruments and an increase in Retail selling expenses due the inclusion of the UAP business since May 5, 2008, partly offset by lower stock-based compensation expense and lower potash profit taxes.
The effective tax rate was 28 percent for both the second quarter and first half of 2009, compared with an effective tax rate of 33 percent for the corresponding periods of 2008. The lower tax rate was due to a higher proportion of income earned in lower taxed jurisdictions in 2009.
BUSINESS SEGMENT PEFORMANCE
Retail
Retail's 2009 second quarter net sales were $3.1-billion, which was 26 percent higher than the $2.5-billion in the second quarter of 2008. Gross profit was $597-million in the second quarter of 2009, compared to $667-million for the same period last year while Retail EBIT was $283-million in the second quarter of 2009, versus EBIT of $409-million in the second quarter of 2008 and $142-million in the same quarter of 2007. Retail results are not directly comparable to the same period last year due to the inclusion of UAP, which was acquired on May 5, 2008.
Crop nutrients net sales were $1.3-billion this quarter, an increase of $59-million compared to the second quarter of 2008. The increase was due to the additional five weeks of UAP business recorded this quarter, which was mostly offset by a significant reduction in Legacy Agrium Retail sales volumes versus the same period last year. Gross profit was $117-million this quarter compared to $335-million in the second quarter of 2008. The decrease was due to lower sales volumes from Legacy Agrium Retail and significantly lower margins resulting from the carryover of higher priced crop nutrient inventories from the fall of 2008, which were sold into a lower price environment this spring. This resulted in crop nutrient margins averaging 9 percent in the second quarter of 2009, compared to 27 percent in the second quarter of 2008 or 24 percent in 2007 which was a more normal year. We anticipate crop nutrient margins to continue to improve in the second half of 2009 and are expected to reach near-normal levels in the fourth quarter as the majority of the higher priced nutrient inventory position will have been sold.(1) North American nutrient sales volumes in the second quarter were also influenced by the late, wet spring season which impacted farmers' ability to apply crop nutrients. Sales volumes and margins in our South American operations were also significantly lower this quarter than the same period last year due to extremely dry conditions and the added challenge of uncertainty over government policies. We anticipate improved sales volumes in the second half of 2009 as growers catch up on reduced application rates over the past year.(1)
Crop protection net sales increased by 41 percent this quarter, reaching $1.2-billion in the second quarter of 2009 compared to $860-million in the same period last year. Our gross profit this quarter reached $304-million, an increase of $81-million over last year's $223-million. The strength of earnings from this product line illustrates the benefits of the diversity in our Retail business. Most of the increase in sales and gross profits was due to the addition of a full quarter of UAP's significant crop protection business, including a broad range of private label products. Crop protection product margins as a percentage of net sales were 25 percent for the second quarter of 2009 as compared to 26 percent for the same period last year primarily due to lower margins on glyphosate products.
Net sales for seed, services and other increased by 59 percent, to $629-million this quarter, from $396-million in the second quarter of 2008. Gross profit was $176-million in the second quarter of 2009, compared to $109-million for the same period last year. Seed sales accounted for about $530-million in sales and $104-million in gross profit for the quarter.
Retail selling expenses for the second quarter of 2009 were $273-million, a 29 percent increase over last year's level, primarily due to the inclusion of an additional five weeks of UAP business. Selling expenses as a percentage of net sales in the second quarter of 2009 were slightly higher on a quarter over quarter basis.
(1) See disclosure in the section "Outlook, Key Risks and Uncertainties" in our 2009 second quarter MD&A and additional assumptions in the section "Management's Discussion and Analysis".
Wholesale
Wholesale's net sales were $950-million for the second quarter of 2009 compared to $1.4-billion for the second quarter of 2008. Gross profit was $212-million in the second quarter of 2009, a $370-million reduction from the record second quarter for 2008 of $582-million. EBIT of $215-million in the second quarter of 2009 was significantly lower than the $647-million earned in the second quarter of 2008. The key factors impacting the results were lower sales prices and volumes for nitrogen and phosphate products combined with significantly lower potash sales volumes and lower gains on derivative financial instruments.
Nitrogen gross profit was $182-million this quarter, compared to $246-million in the same quarter last year. Nitrogen prices were lower than the same period last year across all products for both benchmark and Agrium's realized prices. Sales volumes were similar to the same period last year, with lower UAN sales volumes, offset by higher Profertil export sales. Nitrogen cost of product was $227 per tonne this quarter, a 27 percent decrease versus last year. The lower production cost was a result of lower North American gas prices and favorable movement in foreign exchange rates. Agrium's nitrogen margins averaged $146 per tonne this quarter, compared with $196 per tonne in the second quarter of last year. Ammonia margins were higher than the same quarter last year. Urea margins were lower than last year but remained well over $100 per tonne.
Agrium's overall natural gas cost was $4.59/MMBtu in the second quarter of 2009 versus $7.36/MMBtu in the second quarter of 2008. The U.S. benchmark (NYMEX) natural gas price for the second quarter of 2009 was $3.60/MMBtu, versus $10.80/MMBtu in the same quarter last year and $4.86/MMBtu in the first quarter of 2009. The AECO (Alberta) basis differential was $0.49/MMBtu for the second quarter of 2009.
Phosphate gross profit was $12-million, compared to $96-million for the same quarter last year. Sales volumes were 12 percent lower than the same quarter last year. Realized sales prices averaged $454 per tonne which were 43 percent less than the $791 per tonne achieved in the same quarter last year. Benchmark phosphate prices for the same comparative period were down about 70 percent as compared to the second quarter of 2008. Phosphate cost of product decreased $60 per tonne to $408 per tonne compared to the second quarter of 2008, due to lower sulphur, ammonia and rock costs. Gross margin for phosphate was $46 per tonne compared with $323 per tonne in the second quarter of 2008.
Potash gross profit was $23-million versus $184-million in the second quarter of 2008. Realized selling prices were 81 percent higher than last year's levels and contributed to higher per tonne margins. The higher prices were more than offset by the impact of a significant decrease in sales volumes and higher cost of product due to lower production volumes. Sales volumes decreased by 513,000 tonnes compared to the same period last year. Both international and domestic demand were significantly lower than normal due to a combination of delayed contract settlements in China and India, credit issues in many other international markets and the current cautious approach to replenishing stocks by retailers and distributors in North America and globally. Cost of product on a per tonne basis increased substantially from the same quarter of 2008 due to lower production volumes, resulting in a larger proportion of fixed costs being allocated to fewer sales tonnes. Gross margin on a per tonne basis was $377 per tonne, which was 17 percent above the $321 per tonne in the second quarter of last year.
Purchase for resale sales volumes were 81 percent higher in the second quarter of 2009 than last year's levels, largely due to the addition of the European CMF business. Gross profit in the second quarter of 2009 was a loss of $28-million versus $29-million in gross profit for the same period last year. The reduction was due to a 34 percent decrease in overall realized selling price compared to last year's levels and a $29-million inventory write-down this quarter as a result of net realizable value adjustments to our purchased product inventories.
Wholesale expenses were $62-million higher in the second quarter of 2009 than for the same period last year due primarily to a lower gain in derivative financial instruments compared to the same period last year. Unrealized net mark-to-market gains of $38-million and realized losses of $34-million from natural gas, power and other derivatives in the second quarter of 2009 were both lower than the significant gains experienced in the same period last year. This variance in derivative valuations was partially offset by a decrease in potash profit and capital taxes of $43-million, due mainly to lower potash sales volumes.
Advanced Technologies
Advanced Technologies' second quarter 2009 net sales were $82-million compared to $107-million in the second quarter of 2008. Net sales and gross profit were impacted by reduced volumes and margins in turf and ornamental due to lower household expenditures as a result of the slower economic growth. ESN net sales were impacted primarily by lower selling prices as benchmark urea prices were less than half what they were in the second quarter of last year. However, gross profit for ESN was largely unchanged, as slightly lower sales volumes were offset by expanded per tonne margins, as lower costs more than offset lower sales prices. Year to date ESN sales volumes and gross profit are both higher compared to 2008.
Gross profit for Advanced Technologies was $17-million for the quarter, compared with $20-million for the same period last year, while EBITDA was $12-million, a decrease of $3-million versus the comparable period in 2008. The reduction in EBITDA was due to weaker demand and margins from a number of our controlled-release products other than ESN, due to lower housing starts and a depressed economy. In the second quarter, ESN accounted for 35 percent of Advanced Technologies' gross profit, an increase from the 29 percent in the same period last year.
Other
EBIT for our Other non-operating business unit for the second quarter of 2009 was $37-million, an increase of $132-million over the loss of $95-million for the second quarter of 2008. EBIT for Other for the first half of 2009 was $17-million, an increase of $130-million over the loss of $113-million for the same period of 2008. The increases in EBIT for the second quarter and first half of 2009 reflected a significant decrease in stock-based compensation expense driven by lower increases in our share price in the corresponding periods of 2009 and recognition of gross profit deferred by Wholesale in 2008 on the sales of products to Retail now sold to external customers in 2009.
FINANCIAL CONDITION
The following are changes to working capital on our Consolidated Balance
Sheets in the six-month period ended June 30, 2009.
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As at
(millions
of U.S. Jun 30, Dec 31,
dollars) 2009 2008 Change Explanation of the change in balance
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Current
assets
Cash and 251 374 (123) See discussion under the Section
cash "Liquidity and Capital Resources".
equivalents
Accounts 2,230 1,223 1,007 Increased sales activities during the
receivable spring and higher Retail vendor rebates
receivable, partially offset by federal
income tax refund received in the first
quarter of 2009.
Inventories 2,318 3,047 (729) Lower Wholesale and Retail inventory
volumes and decrease in input costs
(nitrogen, phosphate and product
purchased for resale). Partially offset
by increase in chemical prices and
lower chemical sales volumes.
Prepaid 322 475 (153) Drawdown of pre-bought Retail inventory
expenses due to increased sales activities in
and the spring. Partially offset by
deposits quarterly potash profit tax
installments in excess of the related
accrued potash profit tax and costs
related to the proposed CF acquisition.
See discussion under the Section
"Business Acquisition".
Marketable 108 - 108 Majority of change from the purchase of
securities CF shares in Q1'09. See discussion
under the Section "Business
Acquisition".
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Current
liabilities
Bank 349 610 (261) Repayment in Q1'09 of certain variable
indebtedness rate loans taken in Q4'08 to meet UAP
working capital requirements and
removal of EAgrium bank indebtedness
as a result of the deconsolidation of
EAgrium.
Accounts 2,328 2,200 128 Retail inventory purchases made in
payable anticipation of the spring season and
and accrued increase in the accrued current income
liabilities tax liability. Partially offset by:
decrease in Wholesale customer
prepayments due to slowdown in the
fertilizer market and unstable prices,
drawdown in Retail customer prepayments
received during the spring season, and
lower plant utilities due to reduction
in production.
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Working
capital 2,552 2,309 243
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LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $199-million in the second quarter of 2009, compared with cash used in operating activities of $317-million in the same period of 2008. Cash provided by operating activities was $271-million in the first half of 2009, a $198-million increase from the same period of last year. Driving this quarter change was the unusually high change in non-cash working capital that occurred in the second quarter of 2008 when inventory increased significantly reflecting the price escalation that occurred in the agricultural sector last spring and a significant reduction in prepaid expenses and deposits. This was partially offset by a $266-million decrease in net earnings and a $343-million non-cash decrease in future income tax liabilities. Driving the year-over-year change was a $0.9-billion increase in non-cash working capital due to a significant reduction in inventory and an increase in accounts payable and accrued liabilities, in addition to a decrease in unrealized gain on derivative financial instruments. This was partially offset by a $521-million decrease in net earnings and a $360-million non-cash decrease in future income tax liabilities.
Below is a summary of our inventory balances as at June 30, 2009 and
December 31, 2008:
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Inventories: At At
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(millions of U.S. dollars) June 30, 2009 December 31, 2008
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Wholesale 556 946
Retail:
Crop nutrient 388 1,031
Crop protection 1,123 829
Seed 182 176
Other 26 19
Advanced Technologies 43 46
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2,318 3,047
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Cash used in investing activities decreased by $2.7-billion in the second quarter and first half of 2009 both primarily due to the UAP acquisition in the second quarter of 2008 and lower capital expenditures in the first half of 2009.
Cash provided by financing activities was $74-million in the second quarter of 2009 compared with $1.6-billion in the same period of 2008. Cash used in financing activities was $127-million in the first half of 2009, compared with cash provided by financing of $1.6-billion in the same period of 2008. The quarter-over-quarter and year-over-year changes reflected the issuance of long-term debt and bank indebtedness of $1.2-billion used to finance the UAP acquisition in the second quarter of 2008 and a pay-down of our bank indebtedness in the first half of 2009.
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Short-term credit facilities available at
June 30, 2009 a) b) Total Unutilized Utilized
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(millions of U.S. dollars)
North American revolving credit facilities
expiring 2010 and 2012 835 639 196
European credit facilities expiring in 2009 233 155 78
South American credit facilities expiring 2009 to
2012 165 90 75
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1,233 884 349
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a) In addition to the facilities detailed in this table, we have committed
facilities of $1.4 -billion for the CF acquisition.
b) As of June 30, 2009, a total of $200-million was drawn on our accounts
receivable securitization facility. For further information, see
discussion under the section "Off-Balance Sheet Arrangements" on page 75
of our 2008 Annual Report.
OUTSTANDING SHARE DATA
The number of outstanding shares as at July 31, 2009 was 157 million. As at July 31, 2009, there were approximately 1.1 million stock options outstanding and issuable assuming full conversion, where each option granted can be exercised for one common share.
There were no shares repurchased during the first half of 2009 under our normal course issuer bid.
SELECTED QUARTERLY INFORMATION
(Unaudited, in millions of U.S. dollars, except per share information)
2009 2008 2007
---------------------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
Net sales $ 4,090 1,753 1,941 3,113 3,870 1,107 1,426 989 2,034
Gross profit 890 273 522 1,048 1,261 392 533 305 572
Net earnings (loss) 370 (60) 124 367 636 195 172 51 229
Earnings (loss) per
share
-basic $ 2.36 (0.38) 0.79 2.32 4.03 1.24 1.25 0.38 1.71
-diluted $ 2.35 (0.38) 0.79 2.31 4.00 1.23 1.24 0.38 1.70
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The agricultural products business is seasonal in nature. Consequently, quarter-to-quarter results are not directly comparable. Sales are concentrated in the spring and fall planting seasons, while produced inventories are accumulated throughout the year. Cash collections generally occur after the planting seasons in North and South America. In addition, our acquisition of UAP on May 5, 2008 impacts the comparability of quarterly results.
BUSINESS ACQUISITION
On February 25, 2009, Agrium submitted a proposal to the board of directors of CF to acquire all of the capital stock of CF for cash and Agrium shares at $72.00 per CF share, or a total of approximately $3.6-billion, based on the closing price of Agrium shares on February 24, 2009. Agrium would fund the cash portion through available liquidity and committed financing. The board of directors of CF rejected Agrium's proposal on March 9, 2009.
On March 16, 2009, Agrium commenced an exchange offer for all of the outstanding shares of CF (the "Offer"), pursuant to which CF stockholders would receive $31.70 in cash plus one common share of Agrium for each CF share. The Offer is subject to a number of conditions, including the negotiation of a definitive merger agreement and regulatory approvals under Canadian and U.S. antitrust legislation. The Canadian Competition Bureau and the Federal Trade Commission (United States) are reviewing the transaction. On March 27, 2009, Agrium announced an increase in the cash portion to $35.00, for an aggregate consideration of $1.8 billion in cash and 50.2 million shares. On May 11, 2009, Agrium announced an increase in the cash portion to $40.00 for an aggregate cash consideration not to exceed $2.01 billion. The Offer and withdrawal rights will expire on August 19, 2009, unless extended. The CF board of directors has rejected the Offer.
Agrium is fully committed to acquiring CF and intends to continue to press the board of directors of CF to execute a mutually beneficial merger agreement for our respective shareholders. Agrium has had extensive discussions with CF shareholders, who have advised Agrium that they favour a combination between Agrium and CF and want the CF board to engage in discussions with us. Agrium is prepared to increase its Offer further if CF can demonstrate additional value.
The rules of the Toronto Stock Exchange ("TSX") do not require that we obtain the approval of our shareholders, but the TSX has the discretion to require us to obtain shareholder approval. During February 2009, we acquired 1.2 million shares of CF at an average cost of $52.34 for the total consideration of $65-million, the maximum allowed under FTC regulations. The shares are classified for accounting purposes as available for sale financial instruments with changes to the fair value being recorded in other comprehensive income. At June 30, 2009, the fair value of the CF shares was $92-million.
EGYPT NITROGEN PROJECT
In the third quarter of 2008, we entered into an agreement with MOPCO, whereby MOPCO would acquire EAgrium and all related contractual obligations through a share exchange. The share exchange was completed on January 26, 2009, which resulted in our owning 26 percent of MOPCO. We account for our investment in MOPCO in the Wholesale business unit using the equity method.
INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
The Canadian Institute of Chartered Accountants' Accounting Standards Board has published its strategic plan for convergence of Canadian generally accepted accounting standards with IFRS as issued by the International Accounting Standards Board. The changeover date for Canadian publicly accountable enterprises is January 1, 2011 and will require restatement of comparative figures.
Agrium is currently in the design and development phase of its IFRS transition plan. To date, progress remains on plan for a successful IFRS implementation.
At this time, the full impact of transitioning to IFRS on the Company's future financial position and future operational results is not reasonably determinable or estimable. We continue to assess the available transitional exemption options along with the accounting policies under IFRS and the resulting impacts.
NON-GAAP MEASURES
In the discussion of our performance for the quarter, in addition to the primary measures of earnings and earnings per share, we make reference to EBIT (net earnings before interest expense and income taxes) and EBITDA (net earnings before interest expense, income taxes, depreciation, amortization and asset impairment). We consider EBIT and EBITDA to be useful measures of performance because income tax jurisdictions and business segments are not synonymous and we believe that allocation of income tax charges distorts the comparability of historical performance for the different business segments. Similarly, financing and related interest charges cannot be allocated to all business segments on a basis that is meaningful for comparison with other companies.
EBIT and EBITDA are not recognized measures under GAAP, and our methods of calculation may not be comparable to other companies. Similarly, EBITDA should not be used as an alternative to cash provided by (used in) operating activities as determined in accordance with GAAP.
The following is a reconciliation of EBITDA and EBIT to net earnings as calculated in accordance with GAAP:
Three Months Ended June 30
(millions of 2009
U.S. dollars)--------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Consolidated
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EBITDA 307 244 12 39 602
Depreciation
and amortization 24 29 4 2 59
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EBIT 283 215 8 37 543
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Interest
expense (27)
Income taxes (146)
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Net earnings 370
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Three Months Ended June 30
(millions of 2008
U.S. dollars)--------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Consolidated
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EBITDA 431 682 15 (93) 1,035
Depreciation
and amortization 22 35 4 2 63
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EBIT 409 647 11 (95) 972
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Interest
expense (25)
Income taxes (311)
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Net earnings 636
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Six Months Ended June 30
(millions of 2009
U.S. dollars)--------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Consolidated
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EBITDA 239 323 18 21 601
Depreciation
and amortization 50 51 9 4 114
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EBIT 189 272 9 17 487
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Interest
expense (58)
Income taxes (119)
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Net earnings 310
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Six Months Ended June 30
(millions of 2008
U.S. dollars)--------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Consolidated
----------------------------------------------------------------------------
EBITDA 444 1,017 25 (110) 1,376
Depreciation
and amortization 31 57 8 3 99
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EBIT 413 960 17 (113) 1,277
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Interest
expense (38)
Income taxes (408)
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Net earnings 831
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BUSINESS RISKS
The information presented on business risks on pages 85 - 90 in our 2008 Annual Report has not changed materially since December 31, 2008.
CONTROLS & PROCEDURES
There have been no changes in our internal control over financial reporting during the six months ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OUTLOOK, KEY RISKS AND UNCERTAINTIES
A second consecutive year of delayed corn and soybean planting in the U.S. Corn Belt led to a high level of volatility in grain and oilseed prices during the second quarter. Grain prices came under pressure following the completion of spring planting and pressured further when the USDA reported significantly higher than expected corn and soybean planted area at the end of June. Prices have stabilized since then, but significant uncertainty remains with respect to global grain and oilseed production and prices for 2009/10 at this early stage of the year. The USDA is currently forecasting that global grain ending stocks will increase slightly. This assumes normal yields globally, although weather and crop nutrient levels will play an important role in determining final yields. Dry weather has hampered grain production in Western Canada and Argentina, leading to the lowest planted area of wheat in Argentina in recent history. In addition, monsoon rains in India are below normal for the first two months of the growing season. The significant reduction in global fertilizer use this past year is expected to have some impact on yield potential this year and could result in potential nutrient deficiencies for 2010/11, which could lead to higher than normal application rates starting this fall.
Wet spring weather delayed demand for crop protection products in North America this year but higher corn acreage provided solid demand for seed and most crop protection products.
