EX-99.1 2 d456215dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO   News Release

 

February 5, 2018

Nutrien Provides 2018 Guidance and Announces Agrium and PotashCorp Fourth-Quarter Earnings

Saskatoon, Saskatchewan, February 5, 2018 – Nutrien Ltd. (Nutrien) announced today fourth-quarter 2017 results for Agrium Inc. (Agrium) and Potash Corporation of Saskatchewan Inc. (PotashCorp) and provided financial guidance for 2018.

HIGHLIGHTS

 

    Agrium fourth-quarter earnings from continuing operations, adjusted for items not included in guidance, of $0.781 per share2 (see page 5 for a reconciliation to net earnings from continuing operations of $0.19 per share)

 

    PotashCorp fourth-quarter adjusted earnings of $0.06 per share (see page 11 for a reconciliation to net loss of $0.09 per share)

 

    2017 earnings for Agrium were supported by record Retail EBITDA3 of $1.2 billion and margins of 10 percent while stronger potash prices, sales volumes and lower cash costs per tonne benefited both companies

 

    Nutrien full-year 2018 guidance of $2.10 to $2.60 earnings per share from continuing operations, excluding incremental depreciation and amortization related to purchase price allocation of $150 million to $300 million

 

    Nutrien 2018 EBITDA of $3.2 billion to $3.7 billion

 

    Nutrien sold its equity stake in Israel Chemicals Ltd. (ICL) in January 2018 for net proceeds of $685 million

 

    Nutrien announced an agreement to purchase Agrichem, a leading Brazilian specialty plant nutrition company with total annual historical net sales of over $55 million

 

    Nutrien achieved over $40 million in run-rate synergies year-to-date 2018

CEO COMMENTARY

“Nutrien is a global integrated crop inputs provider focused on delivering yield-enhancing products and services to our customers in a sustainable manner, while maximizing shareholder value,” said Nutrien President and CEO Chuck Magro. “Our significant positions in retail, potash and nitrogen provide multiple avenues to generate significant value and we remain focused on capturing half a billion dollars in annual merger synergies by the end of 2019.

“We further expect to realize significant proceeds from the ongoing sale of equity positions and will continue to reinvest in growing our retail business and return cash to shareholders,” added Mr. Magro.

 

1


MARKET OUTLOOK

Agriculture Fundamentals

 

U.S. Planted Acres (millions)
    

                                

Crop

       2016          2017          2018F  

Corn

       94.0          90.2          89.0-91.0  

Soybean

       83.4          90.1          89.0-91.0  

Wheat

       50.2          46.0          45.0-47.0  

Cotton

       10.1          12.6          12.5-13.0  

Source: USDA

 

    Despite historically high crop production in many key growing regions in 2017, the United States Department of Agriculture (“USDA”) projects that global grain consumption will exceed production during the 2017/18 crop year. Global grain and oilseed demand has grown by 2.7 percent per year over the past five years, the highest five-year growth period since the early 1980s.

 

    Major U.S. crop prices are currently similar to year-ago levels, leading us to expect minimal shifts in crop area in 2018. The development of the South American corn and soybean crops, particularly the second corn crop in Brazil, will be a driver of crop prices in the coming months and may influence U.S. planting decisions.

 

    Nutrient prices remain affordable, which we expect will lead to robust applications in the North American spring season.

 

    We anticipate that growers will continue to optimize crop input expenditures, similar to recent years. Record U.S. corn yields in the past two years provides evidence that growers continue to focus on increasing productivity by utilizing crop inputs and solutions.

Potash

 

Global Demand (millions of tonnes KCl)
    

Market

     2016      2017E      2018F

China

     14.1      15.1      15.5-16.0

India

     3.8      4.5      4.5-5.0

Other Asia

     9.0      9.6      9.5-10.0

Latin America

     11.7      12.2      12.0-12.5

North America

     9.7      10.2      9.5-10.0

Other

     12.0      12.4      12.5-13.0

World total shipments

     60.3      64.0      64.0-66.0*
                      
                      

 

* Forecast world total shipments range is narrower than the sum of individual market ranges

 

    Global potash shipments set a new record of approximately 64 million tonnes in 2017 with significant growth achieved in all major markets. Downstream inventories ended 2017 at levels flat to lower than a year ago, meaning global shipments increased in response to rising consumption. We expect that demand will continue to be robust in 2018 and that annual global potash shipments will be between 64 and 66 million tonnes.

 

    North American spring application rates are expected to remain normal supported by good affordability, and we anticipate shipments similar to the historical average but slightly below 2017.

 

2


    Brazilian potash imports set a new record of 9.2 million tonnes in 2017 and inland inventories ended the year at historically low levels, indicating robust consumption and supportive of strong import demand in 2018.

 

    Chinese and Indian potash demand was strong in 2017 and inventories ended the year flat to lower than 2016 levels. We expect continued demand growth in China and India in 2018 but at a slower pace than 2017 levels. Potash demand remains reasonably strong in other Asian countries amid stable and profitable prices for a wide range of key crops.

 

    Most global potash producers have heavily committed sales volumes for the first quarter of 2018, leaving available supplies relatively tight. Greenfield potash capacity is anticipated to continue to ramp up in 2018, but we expect a portion of the new capacity will be offset by the closure of mines reaching end of life and product mix changes by some producers.

Nitrogen

 

    Nitrogen prices have started 2018 firmer, with current benchmark nitrogen prices up between 15 to 40 percent from fourth quarter 2017 lows, depending on the product.

 

    Global energy prices are expected to increase marginal production costs in 2018, as crude oil prices have increased approximately 20 percent year-over-year, supporting both formula-based gas contracts in Europe and LNG prices. Chinese production rates have been cut back by ongoing regulatory pressure, natural gas availability, significantly higher natural gas prices and continued strength in coal prices.

 

    Indian urea inventories are very low, which should support import demand in the coming months, however import demand is expected to remain volatile as the country balances subsidy policy with changing market dynamics.

 

    Net North American offshore imports of urea were down by 50 percent or 1.0 million tonnes from July through December 2017. The decrease in imports exceeded the increase in domestic production for the same period. As a result, North American offshore import requirements for first-half 2018 may approach similar levels as the first half of the prior year.

Phosphate

 

    Higher input costs have lent support to phosphate prices but continue to weigh on margins. Sulfur prices have recently risen and remain approximately 50 percent above 2017 lows, while traded ammonia prices are up 50 to 70 percent from 2017 lows.

 

    Production curtailments have reduced export availability from both the U.S. and China, which has provided some support to phosphate fertilizer prices.

 

3


FINANCIAL OUTLOOK AND GUIDANCE

 

2018 Annual Guidance Ranges

     Annual
       Low      High

Earnings per share

     $2.10      $2.60

Consolidated EBITDA (billions)

     $3.2      $3.7

Retail EBITDA (billions)

     $1.2      $1.3

Potash EBITDA (billions)

     $1.1      $1.3

Nitrogen EBITDA (billions)

     $0.9      $1.1

Potash sales tonnes (millions)

     11.8      12.4

Nitrogen sales tonnes (millions) (a)

     10.0      10.4

Effective tax rate on continuing operations

     24%      25%

Sustaining capital expenditures (billions)

     $1.0      $1.1

 

2018 Annual Assumptions & Sensitivities
    

          

FX rate CAD to USD

     $ 1.26  

NYMEX natural gas ($US/MMBtu)

     $ 3.00  

$20/tonne change in realized Potash selling prices ($/share)(b)

     $ 0.24  

$20/tonne change in realized Ammonia selling prices ($/share)(b)

     $ 0.07  

$20/tonne change in realized Urea selling prices ($/share)(b)

     $ 0.09  

 

(a) Excludes ESN®, Rainbow and Europe sales.
(b) Sensitivities are calculated pre-synergies.

Purchase Price Allocation (PPA) impact – Our 2018 earnings per share guidance excludes the impact of incremental depreciation and amortization of approximately $150 million to $300 million resulting from the fair valuing of Agrium’s assets and liabilities as of January 1, 2018 in accordance with purchase accounting.

Harmonization of Accounting Policies – Harmonization of Agrium accounting policies to the accounting policies of PotashCorp is expected to reduce Retail EBITDA by approximately $35 million due to the reclassification of items previously considered as other finance costs and is included in our annual Retail EBITDA guidance.

Synergies – In 2018, we expect to realize cash synergies of $175 million to $225 million and run rate synergies of $250 million by the end of 2018. We expect costs to achieve these ongoing synergies of $50 to $70 million in 2018, which are excluded from our earnings per share and EBITDA guidance.

EPS – Based on the factors set out under the heading “Market Outlook” and the assumptions above, our full-year 2018 earnings per share guidance is $2.10 to $2.60. In addition to the PPA impact and costs of achieving synergies noted above, our guidance excludes share-based compensation expense (recovery). Equity earnings relating to investments now classified in discontinued operations are included in our earnings per share guidance.

 

4


AGRIUM RESULTS

Agrium fourth-quarter earnings from continuing operations totaled $27 million, down from the $69 million earned in the fourth quarter of 2016. Full-year earnings from continuing operations were $502 million compared to $584 million earned in 2016. Results for the quarter and full year were supported by record Retail business unit performance and higher potash sales volumes and margins, but were more than offset by lower nitrogen sales volumes and margins related to plant outages in the second half of 2017.

AGRIUM ADJUSTED NET EARNINGS AND GUIDANCE RELEVANT EARNINGS RECONCILIATION

 

     

Three months ended

December 31, 2017

  

Twelve months ended

December 31, 2017

(millions of U.S. dollars, except per share amounts)    Expense    Net earnings
from continuing
operations
impact
(post-tax)
   Per share  (a)    Expense
(Income)
  Net earnings
from continuing
operations
impact
(post-tax)
  Per share  (a)
                    27        0.19                  502       3.60

Adjustments:

                           

Share-based payments

       29        22        0.16        69       49       0.36

Foreign exchange loss net of non-qualifying derivatives

       3        2        0.02        14       10       0.08

Merger and related costs

       52        39        0.28        94       67       0.50

Impact of Egyptian pound devaluation on investee earnings

                            (16 )       (11 )       (0.08 )

U.S. Tax Reform adjustment

       9        9        0.07        9       9       0.07

Adjusted net earnings (b)

            99        0.72            626       4.53

Environmental remediation liability expense

       11        8        0.06        11       8       0.06

Gain on sale of assets

                            (7 )       (5 )       (0.04 )

Guidance relevant earnings (b)

                  107        0.78                  629       4.55
                                                                 

 

(a) Per share information attributable to equity holders of Agrium.
(b) Effective tax rates of 25 percent for the quarter and 29 percent for the year were used for the adjusted net earnings, guidance relevant earnings, and per share calculations. These adjusted and guidance relevant earnings and per share information are non-IFRS measures. Refer to Selected Non-IFRS Financial Measures and Reconciliations and Supplemental Information.

Agrium Retail

 

        Three months ended December 31  
(millions of U.S. dollars)      2017        2016        Change  

Sales

       2,089          1,828          261  

Cost of product sold

       (1,394        (1,205        (189

Gross profit

       695          623          72  

EBIT4

       174          134          40  

EBITDA

       248          202          46  

Selling expenses

       (517        (476        (41

EBITDA – Retail reported record EBITDA in the fourth quarter of 2017, a 23 percent increase over the previous record achieved in the same period last year. Higher sales for all our crop input products and services were driven by organic growth, recent acquisitions and a 22 percent increase in proprietary product sales.

North American EBITDA increased by 17 percent this quarter compared to the same period last year, with higher nutrient and crop protection product demand in both the U.S. and Canada. International Retail operations achieved a record fourth quarter, with EBITDA up 40 percent year over year, supported by another record quarter for our Australian operations.

 

5


Selling expenses – Total Retail selling expenses increased by 9 percent this quarter compared to the same period in 2016 as a result of acquisitions made in 2017. Selling expenses as a percentage of sales decreased to 25 percent this quarter compared to 26 percent in the same period of 2016.

Retail sales and gross profit by product line

 

(millions of U.S. dollars, except

 where noted)

     Three months ended December 31
     Sales      Gross profit      Gross profit (%)
           2017          2016          Change          2017          2016          Change          2017          2016

Crop nutrients

         890          779          111          168          147          21          19          19

Crop protection products

         712          620          92          327          296          31          46          48

Seed

         107          101          6          51          43          8          48          43

Merchandise

         187          167          20          28          27          1          15          16

Services and other

         193          161          32          121          110          11          63          68

Crop nutrients – Sales were 14 percent higher this quarter compared to the same period last year, due primarily to higher volumes, particularly with record ammonia applications in Canada and higher sales volumes in all other regions. Gross profit was 14 percent higher this quarter due to increased sales volumes, while gross profit margin per tonne remained relatively flat.

Crop protection – Fourth-quarter sales increased by 15 percent compared to the same period last year, due to increased sales in both North America and International operations. The U.S. experienced strong demand for herbicides and fall weed burn-down products this quarter. Proprietary product sales in the quarter increased by 25 percent compared to 2016’s fourth quarter, with the largest increase in market penetration occurring in Australia. Gross profit for the quarter was up 10 percent over the same period last year, due to higher sales volumes across all regions and proprietary products. However, gross profit as a percentage of sales decreased 2 percentage points this quarter due to product mix considerations and a higher percentage of sales to wholesale customers.

Seed – Gross profit in the fourth quarter increased 19 percent compared to the same period last year, due to purchases in the U.S. that were delayed from the third quarter of 2017. Gross profit as a percentage of sales increased to 48 percent from 43 percent in the fourth quarter of last year, due to a return to a higher sales mix to retail customers relative to wholesalers.

Merchandise – Sales increased 12 percent and gross profit was up 4 percent in the fourth quarter of this year relative to the same period last year. The increase in sales was due to higher sales in Australia related to animal health management and higher fuel prices in our Canadian operations.

Services and other – Sales increased by 20 percent and gross profit by 10 percent this quarter compared to the same period last year, due to higher livestock export shipments and wool commissions in Australia. It was also supported by higher sales in North America related to strong demand for fall nutrient and crop protection application services. Gross profit as a percentage of sales declined this quarter due to lower Australian cattle prices.

 

6


Agrium Wholesale

 

        Three months ended December 31
(millions of U.S. dollars)      2017      20165      Change

Sales

         534          594          (60 )

Sales tonnes (000’s)

         1,879          2,161          (282 )

Cost of product sold

         (447 )          (459 )          12

Gross profit

         87          135          (48 )

EBIT

         76          151          (75 )

EBITDA

         134          208          (74 )

Expenses

         (11 )          16          (27 )

EBITDA – Wholesale gross profit and EBITDA this quarter were lower than the same period last year, as stronger results from our potash segment were more than offset by lower results for our nitrogen and phosphate segments. Downtime in our nitrogen and phosphate facilities impacted sales volumes and resulted in higher cost of product sold per tonne. Higher phosphate rock and sulfur input costs and unfavorable changes in the Canadian dollar exchange rate also increased the cost of product sold.

Agrium Potash

 

        Three months ended December 31
(millions of U.S. dollars)      2017      2016      Change

Sales

         137          105          32

Cost of product sold

         (97 )          (84 )          (13 )

Gross profit

         40          21          19

EBIT

         33          13          20

EBITDA

         64          39          25

Gross Profit – Potash gross profit was 90 percent higher than the fourth quarter of 2016, due to a combination of higher prices and sales volumes, which more than offset an increase in the cost of product sold per tonne.

 

        Three months ended December 31
        2017      2016      Change

Sales tonnes (000’s)

                    

North America

         329          286          43

International

         291          304          (13 )

Selling price ($/tonne)

                    

North America

         269          211          58

International

         168          148          20

Total

         221          179          42

Cost of product sold ($/tonne)

         (157 )          (143 )          (14 )

Margin ($/tonne)

         64          36          28

Volumes – Agrium sold 5 percent higher volumes of potash in the fourth quarter of 2017 compared to the same period in 2016. Increased volumes sold domestically more than offset lower international sales, which were impacted by a reduction in Agrium’s Canpotex6 allocation relative to the same period last year.

 

7


Price – Global benchmark potash prices were higher in the fourth quarter of 2017 compared to 2016, and this was reflected in Agrium’s realized selling prices, which were 27 percent higher domestically and 14 percent higher on international sales.

Costs – Cost of product sold per tonne was 10 percent higher in this year’s quarter versus the prior year’s fourth quarter, due to unfavorable changes in the Canadian dollar exchange rate impacting production costs; higher freight costs; and a higher proportion of domestic sales than the comparable period (that include freight and distribution in the cost of product sold). Agrium’s cash cost of product manufactured7 this quarter was $72 per tonne, a $10 per tonne increase over the same period last year.

Agrium Nitrogen

 

        Three months ended December 31
(millions of U.S. dollars)      2017      2016      Change

Sales

         220          285          (65 )

Cost of product sold

         (186 )          (200 )          14

Gross profit

         34          85          (51 )

EBIT

         26          76          (50 )

EBITDA

         46          99          (53 )

Gross Profit – Total nitrogen gross profit was significantly reduced this quarter compared to the same period last year, due to planned and unplanned maintenance outages in the second half of 2017 that reduced product availability in the fourth quarter and resulted in higher cost per tonne. Gross profit was also impacted by slightly lower realized pricing relative to the fourth quarter of 2016.

 

        Three months ended December 31
        2017      2016      Change

Sales tonnes (000’s)

                    

Ammonia

         261          334          (73 )

Urea

         300          439          (139 )

Other

         191          181          10

Selling price ($/tonne)

                    

Ammonia

         342          371          (29 )

Urea

         287          274          13

Other

         234          222          12

Total

         293          298          (5 )

Cost of product sold ($/tonne)

         (248 )          (209 )          (39 )

Margin ($/tonne)

         45          89          (44 )

Volumes – Total nitrogen sales volumes for the fourth quarter were 21 percent lower than the same period in 2016 due to lower production volumes.

Price – Agrium’s fourth-quarter average realized price decreased compared to the prior year’s fourth quarter, with price increases in urea and nitrogen solutions more than offset by lower ammonia pricing, a result of the timing of forward sales activity, and lower nitrate prices driven by lower Tampa ammonia-based contracts.

Costs – Total cost of product sold was 7 percent lower than the same period last year, due to lower sales volumes this quarter. However, on a cost of product sold per tonne basis, costs increased by 19 percent, primarily due to fixed costs being spread over lower sales volumes.

 

8


Natural Gas Prices      Three months ended December 31
(U.S. dollars per MMBtu)      2017      2016      Change

Overall gas cost excluding realized derivative impact

         1.77          2.52          (0.75 )

Realized derivative impact

         0.70          0.07          0.63

Overall gas cost

         2.47          2.59          (0.12 )

Average NYMEX

         2.91          2.99          (0.08 )

Average AECO

         1.54          2.12          (0.58 )

Agrium Phosphate

 

        Three months ended December 31
(millions of U.S. dollars)      2017      20166      Change

Sales

         47          81          (34 )

Cost of product sold

         (49 )          (72 )          23

Gross profit

         (2 )          9          (11 )

EBIT

         (1 )          8          (9 )

EBITDA

         4          13          (9 )

Gross Profit – Total phosphate gross profit was a loss of $2 million compared to a profit of $9 million in the same period last year. The lower earnings were driven primarily by higher rock and sulfur costs as well as an extended maintenance shutdown at our Redwater facility, which increased cost of product sold per tonne.

 

        Three months ended December 31
        2017      2016      Change

Sales tonnes (000’s)

         107          191          (84 )

Selling price ($/tonne)

         436          420          16

Cost of product sold ($/tonne)

         (448 )          (379 )          (69 )

Margin ($/tonne)

         (12 )          41          (53 )

Volumes – Total phosphate volumes for the quarter were 44 percent lower than the same period last year due to lower production volumes.

Price – The average realized selling price for phosphate was 4 percent higher than the same period last year, due to market strength in our primary selling region in Western Canada.

Costs – Total cost of product sold was 32 percent lower than the comparable prior period, due to the lower sales volumes this quarter as a result of the extended maintenance shutdown. On a per-tonne basis, cost of product sold was 18 percent higher, due to higher input costs, including rock and sulfur, and fixed costs being spread over lower sales volumes.

Agrium Wholesale Other

 

        Three months ended December 31
(millions of U.S. dollars)      2017      2016      Change

Sales

         130          123          7

Cost of product sold

         (115 )          (103 )          (12 )

Gross profit

         15          20          (5 )

EBIT

         18          54          (36 )

EBITDA

         20          57          (37 )

 

9


Gross Profit – Total Wholesale Other gross profit was 25 percent lower in 2017’s fourth quarter compared to the same period last year, due to lower ammonium sulfate availability from our Redwater facility.

 

        Three months ended December 31
        2017      2016      Change

Sales tonnes (000’s)

                    

Ammonium sulfate

         61          99          (38 )

ESN® and other

         339          327          12

Selling price ($/tonne)

                    

Ammonium sulfate

         261          240          21

Cost of product sold ($/tonne)

         (173 )          (130 )          (43 )

Margin ($/tonne)

         88          110          (22 )

Volumes – Fourth-quarter ESN® volumes were 16 percent lower than the comparable period in 2016 due to lower product availability related to an outage at our Carseland nitrogen facility. Ammonium sulfate sales volumes were 38 percent lower due to reduced production volumes.

Price – Stronger ESN® market conditions had a favorable impact on selling prices, while ammonium sulfate also saw higher prices due to higher nitrogen benchmark prices and strong demand in Western Canada.

Costs – Cost of product sold per tonne for ammonium sulfate was 33 percent higher during the quarter than the same period last year due to fixed costs being spread over lower sales volumes as a result of the above-noted outages and higher raw material prices.

Agrium Other

EBITDA – EBITDA for our Other non-operating business unit for the fourth quarter of 2017 was a net expense of $122 million, compared to a net expense of $115 million for the fourth quarter of 2016. The variance was primarily due to:

 

    An increase of $38 million in merger and related costs.

 

    An increase of $13 million in our environmental remediation provision, primarily as a result of a change in our estimated future cash outflows for our Idaho phosphate mining and processing sites.

This was partially offset by:

 

    A $15 million impairment loss recorded on an international investment in 2016.

 

    An increase of $11 million in our gross profit recovery as a result of lower intersegment inventories held by Retail at the end of the fourth quarter.

Tax – On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. Included in Agrium’s fourth-quarter earnings is a one-time, net tax expense of $9 million related to the Act. The effective tax rate for the fourth quarter of 2017 remained the same with prior year (2017 and 2016: 25 percent).

 

10


POTASHCORP RESULTS

PotashCorp reported a net loss of $76 million for the quarter, however, this included non-cash impairment charges in phosphate of $276 million and net tax recovery adjustments of $118 million. Adjusted earnings were $59 million for the quarter and $455 million for the year, supported by higher potash prices and lower costs.

POTASHCORP ADJUSTED NET EARNINGS RECONCILIATION

 

(millions of U.S. dollars, except per share amounts)    Three months ended
December 31, 2017
    Twelve months ended
December 31, 2017
 
       Dollars       Per Share (a)       Dollars       Per Share (a)  

Net (loss) income

   $ (76   $ (0.09   $ 327     $ 0.39  

Adjustments:

        

Share-based compensation

     4             18       0.02  

Income tax recovery on US tax changes

     (187     (0.22     (187     (0.22

Income tax expense on Saskatchewan tax changes

     68       0.08              

Impairment of property, plant and equipment

     213       0.25       236       0.28  

Transaction costs

     37       0.04       61       0.07  

Adjusted earnings 8

   $ 59     $ 0.06     $ 455     $ 0.54  
                                  

 

(a) Per share information attributable to equity holders of PotashCorp

PotashCorp Potash

 

        Three months ended December 31  
(millions of U.S. dollars)      2017        2016        Change  

Net sales

     $ 347        $ 349          (2

Cost of goods sold

       (189        (229        40  

Gross margin

       158          120          38  

Gross margin – Potash gross margin of $158 million for the fourth quarter and $785 million for the year exceeded the respective totals of $120 million and $437 million generated in 2016, primarily due to higher prices and reduced per-tonne costs.

 

        Three months ended December 31
        2017      2016      Change

Sales volumes (tonnes 000’s)

                    

North America

         568          720          (152 )

Offshore

         1,340          1,489          (149 )

Average realized price ($/tonne)

                    

North America

         214          176          38

Offshore

         169          148          21

Average

         182          157          25

Cost of goods sold ($/tonne)

         (96 )          (101 )          5

Gross margin ($/tonne)

         86          56          30

Volumes – Following record third-quarter shipments, sales volumes for the fourth quarter of 1.9 million tonnes were below the 2.2 million tonnes sold in the same period last year. In North America, shipments were 21 percent below 2016’s levels, while offshore shipments decreased by 10 percent. The majority of Canpotex’s

 

11


volumes for the quarter were sold to China (28 percent) and Other Asian markets outside of China and India (28 percent), while Latin America and India accounted for 25 percent and 11 percent, respectively.

Price – Our average realized potash price of $182 per tonne surpassed the $157 per tonne realized in the same period last year, as strong customer engagement in all key markets continued to support prices.

Costs – Inventory-related shutdowns reduced production volumes and resulted in manufactured cost of goods sold for the quarter of $96 per tonne. This amount was down from $101 per tonne in the same period last year, primarily due to an unfavorable adjustment to asset retirement obligations recorded in the fourth quarter of 2016.

PotashCorp Nitrogen

 

        Three months ended December 31  
(millions of U.S. dollars)      2017        2016        Change  

Net sales

     $ 316        $ 289          27  

Cost of goods sold

       (257        (239        (18

Margin on inter-segment sales

       11          5          6  

Gross margin

       70          55          15  

Gross margin – Nitrogen gross margin of $70 million for the quarter surpassed the $55 million generated in 2016’s fourth quarter as stronger prices more than offset higher per-tonne costs. Our U.S. and Trinidad operations each accounted for 50 percent of the quarter’s nitrogen gross margin. For the full-year, gross margin of $256 million was down from $361 million in 2016, predominantly due to lower prices and higher costs.

 

        Three months ended December 31  
        2017        2016        Change  

Sales volumes (tonnes 000’s)

              

Ammonia

       505          477          28  

Urea

       283          304          (21

Solutions and Other

       795          855          (60

Average realized price ($/tonne)

              

Ammonia

       270          213          57  

Urea

       288          245          43  

Solutions and Other

       138          142          (4

Average

       207          182          25  

Cost of goods sold ($/tonne)

       (167        (151        (16

Gross margin ($/tonne)

       40          31          9  

Volumes – Total sales volumes of 1.6 million tonnes for the quarter were down 3 percent compared to the same period in 2016, primarily due to lower availability of product related to a turnaround at our Augusta facility.

Price – Our average realized price of $207 per tonne during the quarter was up from $182 per tonne in the same period last year, primarily due to global pricing support from lower Chinese urea exports and ammonia production curtailments in key exporting regions.

Costs – Cost of goods sold for the quarter averaged $167 per tonne, up from $151 per tonne in 2016’s fourth quarter primarily as a result of higher natural gas costs in Trinidad.

 

12


PotashCorp Phosphate

 

        Three months ended December 31  
(millions of U.S. dollars)      2017        2016        Change  

Net sales

     $ 302        $ 290          12  

Cost of goods sold

       (597        (297        (300

Cost on inter-segment sales

       (11        (5        (6

Gross margin

       (306        (12        (294

Gross margin – Negative phosphate gross margin of $306 million for the fourth quarter of 2017 was below the negative $12 million realized during the same period last year, primarily due to non-cash impairment charges of $276 million. For the full year, negative gross margin of $366 million – including non-cash impairment charges of $305 million – trailed the $32 million earned in 2016 when prices for nearly all our phosphate products were higher.

 

        Three months ended December 31
        2017      2016      Change

Sales volumes (tonnes 000’s)

                    

Fertilizer

         534          472          62

Feed and Industrial

         239          243          (4 )

Average realized price ($/tonne)

                    

Fertilizer

         342          328          14

Feed and Industrial

         483          551          (68 )

Average

         385          404          (19 )

Cost of goods sold ($/tonne)

         (782 )          (420 )          (362 )

Gross margin ($/tonne)

         (397 )          (16 )          (381 )

Volumes – Fourth-quarter sales volumes of 0.8 million tonnes surpassed last year’s comparable total of 0.7 million tonnes, mainly due to higher availability of our fertilizer products.

Price – Our average realized phosphate price for the fourth quarter was $385 per tonne, down from $404 per tonne in the same period last year, as higher prices for fertilizer products were more than offset by lower realizations for our feed and industrial products.

Costs – Cost of goods sold was $782 per tonne for the fourth quarter, significantly higher than $420 per tonne in 2016’s fourth quarter, predominantly due to impairment charges at our White Springs and feed plant facilities.

PotashCorp Finance

Investments – Earnings from investments in Arab Potash Company (APC) in Jordan, Israel Chemicals Ltd. (ICL) in Israel and Sociedad Quimica y Minera de Chile S.A. (SQM) in Chile – now classified as discontinued operations9 – were $44 million for the fourth quarter, exceeding the $33 million generated in the same period last year. Our earnings for the year from these investments totaled $173 million and surpassed the $124 million realized in 2016. Classified as continuing operations are dividends from Sinofert Holdings Limited (Sinofert) in China and a $10 million non-cash impairment charge related to this investment in 2016. Subsequent to the fourth quarter of 2017, we completed the sale of our investment in ICL, which generated net proceeds of $685 million.

Tax – Our income tax recovery of $153 million in the fourth quarter was larger than the $10 million recovery in 2016’s fourth quarter, primarily due to the discrete $187 million non-cash deferred tax recovery resulting

 

13


from a federal income tax rate decrease pursuant to U.S. tax reform legislation. This was partially offset by a non-cash discrete deferred tax expense of $68 million pertaining to a Saskatchewan income tax rate increase.

Transaction Costs – During the quarter, we incurred merger-related costs of $51 million, higher than the $10 million sustained in the same period last year.

 

 

Notes

1. All amounts are stated in U.S. dollars.

2. All references to per-share amounts pertain to diluted net income per share.

3. EBITDA is calculated as net earnings (loss) from continuing operations before finance costs, income tax (recovery) expense, and depreciation and amortization. This is a non-IFRS measure. Refer to Selected Non-IFRS Financial Measures and Reconciliation.

4. EBIT is calculated as net earnings (loss) from continuing operations before finance costs and income tax (recovery) expense.

5. Certain amounts have been restated as a result of discontinued operations.

6. Canpotex Limited (“Canpotex”), the offshore marketing company for Nutrien and one other Saskatchewan potash producer.

7. This is a non-IFRS measure. Refer to Selected Non-IFRS Financial Measures and Reconciliation.

8. Generally, a non-IFRS financial measure is a numerical measure of a company’s performance, cash flows or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS. Adjusted earnings is not a measure of financial performance (nor does it have a standardized meaning) under IFRS. In evaluating this measure, investors should consider that the methodology applied in calculating such a measure may differ among companies and analysts. The company uses both IFRS and this non-IFRS measure to assess operational performance. Management believes this non-IFRS measure provides useful supplemental information to investors in order that they may evaluate PotashCorp’s financial performance using the same measures as management. Management believes that, as a result, the investor is afforded greater transparency in assessing the financial performance of the company. This non-IFRS financial measure should not be considered as a substitute for, nor superior to, measures of financial performance prepared in accordance with IFRS. Adjusted earnings is calculated as net (loss) income before share-based compensation net of tax, certain non-cash income tax changes, certain impairment charges net of tax and Transaction costs net of tax. PotashCorp uses adjusted earnings to assess operational performance. Management believes adjusted earnings to be an important measure as it excludes the effects of non-operating items and share-based compensation, supporting a focus on the performance of the company’s day-to-day operations, excluding share-based compensation. As compared to net (loss) income from continuing operations according to IFRS, this measure is limited in that it does not reflect the periodic costs of charges associated with share-based compensation, income tax rate changes, impairments or Transaction costs. Management evaluates such items through other financial measures such as cash flow provided by operating activities. The company believes that this measurement is useful as a valuation measurement.

9. PotashCorp’s discontinued operations includes the following investments held for sale: Sociedad Quimica y Minera de Chile S.A. (“SQM”), Arab Potash Company (“APC”) and Israel Chemicals Ltd. (ICL)

 

 

About Nutrien

Nutrien is the world’s largest provider of crop inputs and services, playing a critical role in helping growers increase food production in a sustainable manner. We produce and distribute over 25 million tonnes of potash, nitrogen and phosphate products world-wide. With this capability and our leading agriculture retail network, we are well positioned to supply the needs of our customers. We operate with a long-term view and are committed to working with our stakeholders as we address our economic, environmental and social priorities. The scale and diversity of our integrated portfolio provides a stable earnings base, multiple avenues for growth and the opportunity to return capital to shareholders. For further information visit us at www.nutrien.com.

 

14


Forward-Looking Statements

Certain statements and other information included in this news release constitute “forward-looking information” or “forward-looking statements” (collectively, “forward-looking statements”) under applicable securities laws (such statements are often accompanied by words such as “anticipate”, “forecast”, “expect”, “believe”, “may”, “will”, “should”, “estimate”, “intend” or other similar words). All statements in this news release, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to: Nutrien’s 2018 annual guidance, including expectations regarding our diluted earnings per share and EBITDA (both consolidated and Retail); expectations regarding net proceeds to be realized from the on-going sale of equity interests; capital spending expectations for 2018; expectations regarding performance of our business segments in 2018; our market outlook for 2018, including potash, nitrogen and phosphate outlook and including anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, crop mix, prices and the impact of currency fluctuations and import and export volumes; expectations regarding completion of previously announced expansion projects (including timing and volumes of production associated therewith) and acquisitions and divestitures; and the expected synergies associated with the merger of Agrium and PotashCorp, including timing thereof. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements.

All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although Nutrien believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The additional key assumptions that have been made include, among other things, assumptions with respect to Nutrien’s ability to successfully integrate and realize the anticipated benefits of its already completed (including the merger of Agrium and PotashCorp) and future acquisitions, and that we will be able to implement our standards, controls, procedures and policies at any acquired businesses to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by Nutrien, including with respect to prices, margins, demand, supply, product availability, supplier agreements, availability and cost of labor and interest, exchange and effective tax rates; the completion of our expansion projects on schedule, as planned and on budget; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2018 and in the future (including as outlined under “Market Outlook”); the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to identify suitable candidates for acquisitions and divestitures and negotiate acceptable terms; ability to maintain investment grade rating and achieve our performance targets; assumptions in respect of our ability to sell equity positions, including the ability to find suitable buyers at expected prices and successfully complete such transactions in a timely manner; the receipt, on time, of all necessary permits, utilities and project approvals with respect to our expansion projects and that we will have the resources necessary to meet the projects’ approach.

Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general global economic, market and business conditions; the failure to successfully integrate and realize the expected synergies associated with the merger of Agrium and PotashCorp, including within the expected timeframe; weather conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy, government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof; political risks, including civil unrest, actions by armed groups or conflict and malicious acts including terrorism; the occurrence of a major environmental or safety incident; innovation and security risks related to our systems; the inability to find suitable buyers for our equity positions and counterparty and transaction risk associated therewith; regional natural gas supply restrictions; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; gas supply interruptions at our Egyptian and

 

15


Argentinian facilities; any significant impairment of the carrying value of certain assets; risks related to reputational loss; certain complications that may arise in our mining processes; the ability to attract, engage and retain skilled employees and strikes or other forms of work stoppages; and other risk factors detailed from time to time in Agrium, PotashCorp and Nutrien reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States, including those disclosed in Agrium’s annual information form for the year ended December 31, 2016 and its 2016 annual management’s discussion and analysis, as well as PotashCorp’s Form 10-K for the year ended December 31, 2016.

The purpose of our expected diluted earnings per share, consolidated EBITDA and Retail EBITDA guidance range is to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes.

Nutrien disclaims any intention or obligation to update or revise any forward-looking statements in this document as a result of new information or future events, except as may be required under applicable U.S. federal securities laws or applicable Canadian securities legislation.

FOR FURTHER INFORMATION:

Investor and Media Relations:

Richard Downey

Vice President, Investor & Corporate Relations

(403) 225-7357

Investors@nutrien.com

Investor Relations:

Jeff Holzman

Senior Director, Investor Relations

(306) 933-8545

Todd Coakwell

Director, Investor Relations

(403) 225-7437

Contact us at: www.nutrien.com

 

 

Nutrien will host a Conference Call on Tuesday, February 6, 2018 at 10:00 am Eastern Time.

 

Telephone Conference:   

Dial-in numbers:

•  From Canada and the U.S. 1-877-269-7756 or 1-201-689-7817

•  No access code required. Please dial in 15 minutes prior to ensure you get on the call.

Live Audio Webcast:    Visit www.nutrien.com/investors/events/2017-q4-earnings-conference-call

 

16


 

LOGO

 

Agrium Inc.

Condensed Consolidated Interim Financial Statements

For the three and twelve months ended

December 31, 2017

 


AGRIUM INC.

Condensed Consolidated Interim Statements of Operations

(Unaudited)

 

    Three months ended
December 31,
    Twelve months ended
December 31,
 

 

 
(millions of U.S. dollars, unless otherwise stated)   2017     2016     2017     2016  
          (restated)           (restated)  

 

 

Sales

    2,450       2,238       13,766       13,457  

Cost of product sold

    1,666       1,489       10,340       10,078  

 

 

Gross profit

    784       749       3,426       3,379  

Expenses

       

Selling

    519       480       2,014       1,913  

General and administrative

    71       64       247       240  

Share-based payments

    29       33       69       55  

Earnings from associates and joint ventures

    (7     (35     (39     (66

Other expenses

    50       43       119       147  

 

 

Earnings before finance costs and income taxes

    122       164       1,016       1,090  

Finance costs related to long-term debt

    55       51       210       204  

Other finance costs

    30       21       101       74  

 

 

Earnings before income taxes

    37       92       705       812  

Income taxes

    10       23       203       228  

 

 

Net earnings from continuing operations

    27       69       502       584  

Net (loss) earnings from discontinued operations

    (9     (2     (187     12  

 

 

Net earnings

    18       67       315       596  

 

 

Attributable to

       

Equity holders of Agrium

    17       67       310       592  

Non-controlling interests

    1             5       4  

 

 

Net earnings

    18       67       315       596  

 

 

Earnings per share attributable to equity holders of Agrium

       

 

 

Basic and diluted earnings per share from continuing operations

    0.19       0.50       3.60       4.20  

Basic and diluted (loss) earnings per share from discontinued operations

    (0.06     (0.01     (1.36     0.09  

 

 

Basic and diluted earnings per share

    0.13       0.49       2.24       4.29  

 

 

Weighted average number of shares outstanding for basic and diluted earnings per share (millions of common shares)

    138       138       138       138  

 

 

See accompanying notes.

Basis of preparation and statement of compliance

The accounting policies used in the preparation of these interim financial statements are those set out in Agrium’s audited consolidated financial statements as at and for the year ended December 31, 2016, which were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board, and were approved for issuance by the Agrium Inc. Audit Committee on February 5, 2018. These interim financial statements do not include all information and disclosures normally provided in annual or quarterly financial statements and should be read in conjunction with our audited annual financial statements and related notes, prepared in accordance with IFRS, contained in our 2016 Annual Report, available at www.nutrien.com.

 

1


AGRIUM INC.

Condensed Consolidated Interim Statements of Comprehensive Income

(Unaudited)

 

    Three months ended
December 31,
    Twelve months ended
December 31,
 

 

 
(millions of U.S. dollars)   2017     2016     2017     2016  

 

 

Net earnings

    18       67       315       596  

Other comprehensive (loss) income

       

Items that are or may be reclassified to earnings

       

Cash flow hedges

       

Effective portion of changes in fair value

    (33     19       (92     7  

Deferred income taxes

    9       (5     25       (1

Associates and joint ventures

       

Share of comprehensive income (loss)

    2       (36     (49     (34

Deferred income taxes

                10        

Foreign currency translation

       

(Losses) gains

    (13     (94     183       59  

Reclassifications to earnings

                6        

 

 
    (35     (116     83       31  

 

 

Items that will never be reclassified to earnings

       

Post-employment benefits

       

Actuarial (losses) gains

    (2     15       (5     (10

Deferred income taxes

    1       (4     2       3  

 

 
    (1     11       (3     (7

 

 

Other comprehensive (loss) income

    (36     (105     80       24  

 

 

Comprehensive (loss) income

    (18     (38     395       620  

 

 

Attributable to

       

Equity holders of Agrium

    (19     (38     389       616  

Non-controlling interests

    1             6       4  

 

 

Comprehensive (loss) income

    (18     (38     395       620  

 

 

See accompanying notes.

 

 

2


AGRIUM INC.

Condensed Consolidated Interim Balance Sheets

(Unaudited)

 

      December 31,  
(millions of U.S. dollars)    2017     2016  

Assets

    

Current assets

    

Cash and cash equivalents

     466       412  

Accounts receivable

     2,406       2,208  

Income taxes receivable

     18       33  

Inventories

     3,321       3,230  

Prepaid expenses and deposits

     1,004       855  

Other current assets

     120       123  

Assets held for sale

     105       —    
     7,440       6,861  

Property, plant and equipment

     7,091       6,818  

Intangibles

     518       566  

Goodwill

     2,228       2,095  

Investments in associates and joint ventures

     522       541  

Other assets

     58       48  

Deferred income tax assets

     85       34  
       17,942       16,963  
                  

Liabilities and shareholders’ equity

    

Current liabilities

    

Short-term debt

     867       604  

Accounts payable

     5,206       4,662  

Income taxes payable

     27       17  

Current portion of long-term debt

     11       110  

Current portion of other provisions

     63       59  
     6,174       5,452  

Long-term debt

     4,397       4,398  

Post-employment benefits

     142       141  

Other provisions

     522       322  

Other liabilities

     106       68  

Deferred income tax liabilities

     473       408  
       11,814       10,789  
Shareholders’ equity     

Share capital

     1,776       1,766  

Retained earnings

     5,461       5,634  

Accumulated other comprehensive loss

     (1,116     (1,231

Equity holders of Agrium

     6,121       6,169  

Non-controlling interests

     7       5  

Total equity

     6,128       6,174  
       17,942       16,963  
                  

See accompanying notes.

 

 

3


AGRIUM INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

 

    

Three months ended

December 31,

 

 

   

Twelve months ended

December 31,

 

 

(millions of U.S. dollars)

   2017    

2016

(restated)

    2017    

2016

(restated)

 
Operating         

Net earnings from continuing operations

     27       69       502       584  

Adjustments for

        

Depreciation and amortization

     138       131       530       493  

Earnings from associates and joint ventures

     (7     (35     (39     (66

Share-based payments

     29       33       69       55  

Unrealized loss on derivative financial instruments

     2       —         1       36  

Unrealized foreign exchange loss (gain)

     —         1       31       (19

Interest income

     (16     (17     (59     (66

Finance costs

     85       72       311       278  

Income taxes

     10       23       203       228  

Other

     30       26       34       23  

Interest received

     16       16       61       66  

Interest paid

     (68     (49     (308     (272

Income taxes paid

     (7     (14     (20     (291

Dividends from associates and joint ventures

     7       68       18       116  

Net changes in non-cash working capital

     1,338       1,101       (15     472  

Cash provided by operating activities

     1,584       1,425       1,319       1,637  

Investing

        

Business acquisitions, net of cash acquired

     (19     (26     (203     (342

Capital expenditures

     (219     (170     (677     (701

Capitalized borrowing costs

     —         (6     (12     (24

Purchase of investments

     (4     (16     (63     (77

Proceeds from sale of investments

     5       19       69       97  

Proceeds from sale of property, plant and equipment

     6       2       34       16  

Other

     (8     51       (19     33  

Net changes in non-cash working capital

     —         10       (51     5  

Cash used in investing activities

     (239     (136     (922     (993

Financing

        

Short-term debt

     (1,011     (1,092     258       (188

Repayment of long-term debt

     (2     (1     (110     (17

Dividends paid

     (121     (120     (483     (482

Cash used in financing activities

     (1,134     (1,213     (335     (687

Effect of exchange rate changes on cash and cash equivalents

     (5     (9     (12     (67

Increase (decrease) in cash and cash equivalents from continuing operations

     206       67       50       (110

Cash and cash equivalents provided by discontinued operations

     14       34       4       7  

Cash and cash equivalents – beginning of period

     246       311       412       515  
Cash and cash equivalents – end of period      466       412       466       412  
                                  

See accompanying notes.

 

 

4


AGRIUM INC.

Condensed Consolidated Interim Statements of Shareholders’ Equity

(Unaudited)

 

                         Other comprehensive income (loss)                    

(millions of U.S. dollars,

except per share data)

  

Millions

of

common

shares

    

Share

capital

    

Retained

earnings

   

Cash

flow

hedges

   

Comprehensive

loss of

associates and

joint ventures

   

Foreign

currency

translation

   

Total

   

Equity

holders
of

Agrium

   

Non-

controlling

interests

   

Total

equity

 

December 31, 2015

     138        1,757        5,533       (56     (17     (1,214     (1,287     6,003       4       6,007  

Net earnings

     —          —          592       —         —         —         —         592       4       596  

Other comprehensive income (loss), net of tax

                      

Post-employment benefits

     —          —          (7     —         —         —         —         (7     —         (7

Other

     —          —          —         6       (34     59       31       31       —         31  

Comprehensive income (loss), net of tax

     —          —          585       6       (34     59       31       616       4       620  

Dividends ($3.5 per share)

     —          —          (484     —         —         —         —         (484     —         (484

Non-controlling interest transactions

     —          —          —         —         —         —         —         —         (3     (3

Share-based payment transactions

     —          9        —         —         —         —         —         9       —         9  

Reclassification of cash flow hedges, net of tax

     —          —          —         25       —         —         25       25       —         25  
December 31, 2016      138        1,766        5,634       (25     (51     (1,155     (1,231     6,169       5       6,174  

Net earnings

     —          —          310       —         —         —         —         310       5       315  

Other comprehensive income (loss), net of tax

                      

Post-employment benefits

     —          —          (3     —         —         —         —         (3     —         (3

Other

     —          —          —         (67     (39     188       82       82       1       83  

Comprehensive income (loss), net of tax

     —          —          307       (67     (39     188       82       389       6       395  

Dividends ($3.5 per share)

     —          —          (483     —         —         —         —         (483     —         (483

Non-controlling interest transactions

     —          —          3       —         —         (2     (2     1       (4     (3

Share-based payment transactions

     —          10        —         —         —         —         —         10       —         10  

Reclassification of cash flow hedges, net of tax

     —          —          —         35       —         —         35       35       —         35  

December 31, 2017

     138        1,776        5,461       (57     (90     (969     (1,116     6,121       7       6,128  
                                                                                    

See accompanying notes.

 

 

5


AGRIUM INC.

Summarized Notes to the Condensed Consolidated Interim Financial Statements

For the three and twelve months ended December 31, 2017

(millions of U.S. dollars, unless otherwise stated)

(Unaudited)

1. Corporate Management

Corporate information

Agrium Inc. (“Agrium”) is incorporated under the laws of Canada. Our Corporate head office is located at 13131 Lake Fraser Drive S.E., Calgary, Canada. We conduct our operations globally from our Wholesale head office in Calgary and our Retail head office in Loveland, Colorado, United States.

Agrium completed a merger with Potash Corporation of Saskatchewan Inc., on January 1, 2018 (“the Merger”). After that date, shares of Agrium no longer trade publicly. The merged companies began trading on the Toronto Stock Exchange and New York Stock Exchange as Nutrien Ltd. (“Nutrien”), under the symbol NTR on January 2, 2018. Further information about the Merger is available in Nutrien’s press release of January 2, 2018, and other documents at www.sedar.com.

In these financial statements, “we”, “us”, “our” and “Agrium” mean Agrium Inc., its subsidiaries and its joint arrangements.

We categorize our operating segments within the Retail and Wholesale business units as follows:

 

    Retail: Distributes crop nutrients, crop protection products, seed and merchandise and provides financial and other services directly to growers through a network of farm centers in two geographical segments:

 

  - North America including the United States and Canada

 

  - International including Australia and South America

 

    Wholesale: Produces, markets and distributes crop nutrients and industrial products as follows:

 

  - Nitrogen: Manufacturing in Alberta and Texas

 

  - Potash: Mining and processing in Saskatchewan

 

  - Phosphate: Production facilities in Alberta and prior to the Conda Phosphate operations disposition as described below, mining facilities in Idaho

 

  - Wholesale Other: Producing blended crop nutrients and Environmentally Smart Nitrogen® (ESN) polymer-coated nitrogen crop nutrients, and operating joint ventures and associates

Additional information on our operating segments is included in note 2.

Seasonality in our business results from increased demand for our products during planting seasons. Sales are generally higher in spring and fall.

Discontinued operations and assets held for sale

On January 12, 2018, we completed the agreements with third parties to dispose of our Conda phosphate operations (“CPO”) and North Bend nitrogen assets (“North Bend”). The sale of CPO and North Bend are the subject of a consent order proposed to the United States Federal Trade Commission (FTC) as remedies to resolve issues in superphosphoric acid and nitric acid related to the Merger. On December 27, 2017, the FTC published related documents, including a proposed consent order, which were open for public comment until January 29, 2018, after which the FTC will decide whether to make the proposed consent order final.

These assets were previously classified as held for sale, as FTC approval and completion of the sales of CPO and North Bend assets is considered highly probable. Additionally, as CPO comprises operations and cash flows that can be clearly distinguished operationally and for financial reporting purposes, its operating results and the impact of re-measurement to the selling price are included in discontinued operations for the quarter and year ended December 31, 2017, and in the comparative quarter and year ended December 31, 2016. Discontinued operations exclude elimination of intercompany transactions.

 

6


AGRIUM INC.

Summarized Notes to the Condensed Consolidated Interim Financial Statements

For the three and twelve months ended December 31, 2017

(millions of U.S. dollars, unless otherwise stated)

(Unaudited)

 

2. Operating Segments

 

Segment information by business unit    Three months ended December 31,  
           2017            2016  
           Retail     Wholesale     Other (a)     Total            Retail     Wholesale     Other (a)     Total  

Sales 

 

- external

     2,076       374             2,450          1,816       422             2,238  
   

- inter-segment

     13       160       (173              12       172       (184      

Total sales

     2,089       534       (173     2,450          1,828       594       (184     2,238  

Cost of product sold

     1,394       447       (175     1,666          1,205       459       (175     1,489  

Gross profit

     695       87       2       784          623       135       (9     749  

Gross profit (%)

     33       16         32          34       23         33  

 

   

 

 

    

 

 

 

Expenses

                   

Selling

     517       6       (4     519          476       9       (5     480  

General and administrative

     26       8       37       71          26       6       32       64  

Share-based payments

                 29       29                      33       33  

Earnings from associates and joint ventures

     (1     (5     (1     (7        (1     (34           (35

Other (income) expenses

     (21     2       69       50          (12     3       52       43  

Earnings (loss) before finance costs and income taxes

     174       76       (128     122          134       151       (121     164  

Finance costs

                 85       85                      72       72  

Earnings (loss) before income taxes

     174       76       (213     37          134       151       (193     92  

Depreciation and amortization

     74       58       6       138          68       57       6       131  

Finance costs

                 85       85                      72       72  

EBITDA (b)

     248       134       (122     260          202       208       (115     295  

 

   

 

 

    

 

 

 
(a) Includes inter-segment eliminations
(b) EBITDA is net earnings (loss) before finance costs, income taxes, depreciation and amortization, and net earnings (loss) from discontinued operations.

 

7


AGRIUM INC.

Summarized Notes to the Condensed Consolidated Interim Financial Statements

For the three and twelve months ended December 31, 2017

(millions of U.S. dollars, unless otherwise stated)

(Unaudited)

 

 

Segment information by business unit    Twelve months ended December 31,  
           2017            2016  
           Retail     Wholesale     Other (a)     Total            Retail     Wholesale     Other (a)     Total  

Sales 

 

- external

     12,056       1,710             13,766          11,723       1,734             13,457  
   

- inter-segment

     47       649       (696                    43       694       (737      

Total sales

     12,103       2,359       (696     13,766          11,766       2,428       (737     13,457  

Cost of product sold

     9,157       1,888       (705     10,340                8,980       1,872       (774     10,078  

Gross profit

     2,946       471       9       3,426                2,786       556       37       3,379  

Gross profit (%)

     24       20               25                24       23               25  
                                                                               

Expenses

                   

Selling

     2,007       24       (17     2,014          1,899       31       (17     1,913  

General and administrative

     100       26       121       247          102       28       110       240  

Share-based payments

                 69       69                      55       55  

(Earnings) loss from associates and joint ventures

     (9     (30           (39        (6     (61     1       (66

Other (income) expenses

     (42     34       127       119                (26     57       116       147  

Earnings (loss) before finance costs and income taxes

     890       417       (291     1,016          817       501       (228     1,090  

Finance costs

                 311       311                            278       278  

Earnings (loss) before income taxes

     890       417       (602     705          817       501       (506     812  

Depreciation and amortization

     289       222       19       530          274       203       16       493  

Finance costs

                 311       311                            278       278  

EBITDA

     1,179       639       (272     1,546                1,091       704       (212     1,583  
                                                                               
(a) Includes inter-segment eliminations

 

8


AGRIUM INC.

Summarized Notes to the Condensed Consolidated Interim Financial Statements

For the three and twelve months ended December 31, 2017

(millions of U.S. dollars, unless otherwise stated)

(Unaudited)

 

Segment information – Retail    Three months ended December 31,  

 

 
         2017            2016  

 

      

 

 

 
         North
America
    International     Retail            North
America
    International     Retail  

 

      

 

 

 

Sales

  - external      1,510       566       2,076          1,332       484       1,816  
  - inter-segment      13             13          12             12  

 

      

 

 

 

Total sales

     1,523       566       2,089          1,344       484       1,828  

Cost of product sold

     990       404       1,394          860       345       1,205  

 

      

 

 

 

Gross profit

     533       162       695          484       139       623  

Expenses

               

Selling

     419       98       517          376       100       476  

General and administrative

     18       8       26          18       8       26  

Earnings from associates and joint ventures

           (1     (1              (1     (1

Other income

     (16     (5     (21        (5     (7     (12

 

      

 

 

 

Earnings before income taxes

     112       62       174          95       39       134  

Depreciation and amortization

     70       4       74          60       8       68  

 

      

 

 

 

EBITDA

     182       66       248          155       47       202  

 

      

 

 

 

 

      

 

 

 

 

9


AGRIUM INC.

Summarized Notes to the Condensed Consolidated Interim Financial Statements

For the three and twelve months ended December 31, 2017

(millions of U.S. dollars, unless otherwise stated)

(Unaudited)

 

 

Segment information – Retail    Twelve months ended December 31,  

 

 
         2017            2016  

 

      

 

 

 
         North
America
    International     Retail            North
America
    International     Retail  

 

      

 

 

 

Sales

  - external      9,874       2,182       12,056          9,565       2,158       11,723  
  - inter-segment      47             47          43             43  

 

      

 

 

 

Total sales

     9,921       2,182       12,103          9,608       2,158       11,766  

Cost of product sold

     7,513       1,644       9,157          7,306       1,674       8,980  

 

      

 

 

 

Gross profit

     2,408       538       2,946          2,302       484       2,786  

Expenses

               

Selling

     1,652       355       2,007          1,555       344       1,899  

General and administrative

     71       29       100          72       30       102  

Earnings from associates and joint ventures

     (7     (2     (9        (4     (2     (6

Other (income) expenses

     (24     (18     (42        3       (29     (26

 

      

 

 

 

Earnings before income taxes

     716       174       890          676       141       817  

Depreciation and amortization

     273       16       289          249       25       274  

 

      

 

 

 

EBITDA

     989       190       1,179          925       166       1,091  

 

      

 

 

 

 

      

 

 

 

 

10


AGRIUM INC.

Summarized Notes to the Condensed Consolidated Interim Financial Statements

For the three and twelve months ended December 31, 2017

(millions of U.S. dollars, unless otherwise stated)

(Unaudited)

 

Segment information – Wholesale   Three months ended December 31,  

 

 
        2017           2016  

 

     

 

 

 
        Nitrogen     Potash     Phosphate     Wholesale
Other (a)
    Wholesale           Nitrogen     Potash     Phosphate     Wholesale
Other (a)
    Wholesale  

 

     

 

 

 

Sales

  - external     156       101       19       98       374         218       74       40       90       422  
  - inter-segment     64       36       28       32       160         67       31       41       33       172  

 

     

 

 

 

Total sales

    220       137       47       130       534         285       105       81       123       594  

Cost of product sold

    186       97       49       115       447         200       84       72       103       459  

 

     

 

 

 

Gross profit

    34       40       (2     15       87         85       21       9       20       135  

Expenses

                     

Selling

    3       1       1       1       6         4       2       1       2       9  

General and administrative

    5       3       (1     1       8         4       2                   6  

Earnings from associates and joint ventures

                      (5     (5                         (34     (34

Other expenses (income)

          3       (1           2         1       4             (2     3  

 

     

 

 

 

Earnings (loss) before income taxes

    26       33       (1     18       76         76       13       8       54       151  

Depreciation and amortization

    20       31       5       2       58         23       26       5       3       57  

 

     

 

 

 

EBITDA

    46       64       4       20       134         99       39       13       57       208  

 

     

 

 

 

 

     

 

 

 

 

(a) Includes ammonium sulfate, ESN and other products

 

11


AGRIUM INC.

Summarized Notes to the Condensed Consolidated Interim Financial Statements

For the three and twelve months ended December 31, 2017

(millions of U.S. dollars, unless otherwise stated)

(Unaudited)

 

Segment information – Wholesale    Twelve months ended December 31,  

 

 
         2017            2016  

 

      

 

 

 
         Nitrogen      Potash      Phosphate      Wholesale
Other (a)
    Wholesale            Nitrogen      Potash      Phosphate      Wholesale
Other (a)
    Wholesale  

 

      

 

 

 

Sales

  - external      755        386        115        454       1,710          860        280        148        446       1,734  
  - inter-segment      254        133        122        140       649          284        139        141        130       694  

 

      

 

 

 

Total sales

     1,009        519        237        594       2,359          1,144        419        289        576       2,428  

Cost of product sold

     757        390        228        513       1,888          757        367        261        487       1,872  

 

      

 

 

 

Gross profit

     252        129        9        81       471          387        52        28        89       556  

Expenses

                             

Selling

     12        5        2        5       24          14        7        2        8       31  

General and administrative

     13        6               7       26          13        7        1        7       28  

Earnings from associates and joint ventures

                          (30     (30                             (61     (61

Other expenses (income)

     18        13        3              34          31        28        2        (4     57  

 

      

 

 

 

Earnings before income taxes

     209        105        4        99       417          329        10        23        139       501  

Depreciation and amortization

     79        113        17        13       222          75        99        16        13       203  

 

      

 

 

 

EBITDA

     288        218        21        112       639          404        109        39        152       704  

 

      

 

 

 

 

      

 

 

 

 

(a) Includes ammonium sulfate, ESN and other products

 

12


AGRIUM INC.

Summarized Notes to the Condensed Consolidated Interim Financial Statements

For the three and twelve months ended December 31, 2017

(millions of U.S. dollars, unless otherwise stated)

(Unaudited)

 

 

Gross profit by product line    Three months ended December 31,             Twelve months ended December 31,  
      2017            2016                   2017             2016         
      Sales     Cost of
product
sold
    Gross
profit
    Sales     Cost of
product
sold
    Gross
profit
            Sales     Cost of
product
sold
    Gross
profit
     Sales     Cost of
product
sold
    Gross
profit
 

Retail

                            

Crop nutrients

     890       722       168       779       632       147          4,121       3,273       848        4,310       3,478       832  

Crop protection products

     712       385       327       620       324       296          4,937       3,752       1,185        4,684       3,570       1,114  

Seed

     107       56       51       101       58       43          1,628       1,303       325        1,462       1,165       297  

Merchandise

     187       159       28       167       140       27          683       577       106        621       518       103  

Services and other (a)

     193       72       121       161       51       110                734       252       482        689       249       440  
       2,089       1,394       695       1,828       1,205       623                12,103       9,157       2,946        11,766       8,980       2,786  

Wholesale

                            

Nitrogen

     220       186       34       285       200       85          1,009       757       252        1,144       757       387  

Potash

     137       97       40       105       84       21          519       390       129        419       367       52  

Phosphate

     47       49       (2     81       72       9          237       228       9        289       261       28  

Ammonium sulfate, ESN and other

     130       115       15       123       103       20                594       513       81        576       487       89  
       534       447       87       594       459       135                2,359       1,888       471        2,428       1,872       556  

Other inter-segment eliminations

     (173     (175     2       (184     (175     (9              (696     (705     9        (737     (774     37  

Total

     2,450       1,666       784       2,238       1,489       749                13,766       10,340       3,426        13,457       10,078       3,379  
                                                                                                            

Wholesale share of joint ventures

 

                         

Nitrogen

     68       47       21       65       53       12                216       167       49        196       164       32  

Total Wholesale including proportionate share in joint ventures

     602       494       108       659       512       147                2,575       2,055       520        2,624       2,036       588  
                                                                                                            
(a) Includes financial services products

 

13


AGRIUM INC.

Summarized Notes to the Condensed Consolidated Interim Financial Statements

For the three and twelve months ended December 31, 2017

(millions of U.S. dollars, unless otherwise stated)

(Unaudited)

 

 

Selected volumes and per tonne information    Three months ended December 31,  
      2017                            2016          
      Sales
tonnes
(000’s)
     Selling
price
($/tonne)
     Cost of
product
sold
($/tonne)
     Margin
($/tonne)
            Sales
tonnes
(000’s)
     Selling
price
($/tonne)
     Cost of
product
sold
($/tonne)
     Margin
($/tonne)
 

Retail

                         

Crop nutrients

                         

North America

     1,791        404        328        76          1,593        395        317        78  

International

     429        386        311        75                395        381        321        60  

Total crop nutrients

     2,220        401        325        76                1,988        392        318        74  
                                                                                 

Wholesale

                         

Nitrogen

                         

North America

                         

Ammonia

     261        342                334        371        

Urea

     300        287                439        274        

Other

     191        234                                  181        222                    

Total nitrogen

     752        293        248        45                954        298        209        89  

Potash

                         

North America

     329        269                286        211        

International

     291        168                                  304        148                    

Total potash

     620        221        157        64                590        179        143        36  

Phosphate

     107        436        448        (12        191        420        379        41  

Ammonium sulfate

     61        261        173        88          99        240        130        110  

ESN and other

     339                                           327                             

Total Wholesale

     1,879        284        238        46                2,161        275        213        62  
                                                                                 

Wholesale share of joint ventures

                         

Nitrogen

     200        339        234        105                222        293        235        58  

Total Wholesale including proportionate share in joint ventures

     2,079        289        237        52                2,383        276        215        61  
                                                                                 

 

14


AGRIUM INC.

Summarized Notes to the Condensed Consolidated Interim Financial Statements

For the three and twelve months ended December 31, 2017

(millions of U.S. dollars, unless otherwise stated)

(Unaudited)

 

 

Selected volumes and per tonne information    Twelve months ended December 31,  
      2017                            2016          
      Sales
tonnes
(000’s)
     Selling
price
($/tonne)
     Cost of
product
sold
($/tonne)
     Margin
($/tonne)
            Sales
tonnes
(000’s)
     Selling
price
($/tonne)
     Cost of
product
sold
($/tonne)
     Margin
($/tonne)
 

Retail

                         

Crop nutrients

                         

North America

     8,373        414        323        91          8,003        446        351        95  

International

     1,829        356        311        45                1,956        379        341        38  

Total crop nutrients

     10,202        404        321        83                9,959        433        349        84  
                                                                                 

Wholesale

                         

Nitrogen

                         

North America

                         

Ammonia

     1,035        378                1,165        402        

Urea

     1,475        283                1,620        294        

Other

     863        231                                  817        244                    

Total nitrogen

     3,373        299        224        75                3,602        318        211        107  

Potash

                         

North America

     1,335        256                1,187        217        

International

     1,097        162                                  1,052        154                    

Total potash

     2,432        213        160        53                2,239        187        164        23  

Phosphate

     551        429        414        15          640        450        408        42  

Ammonium sulfate

     345        267        132        135          341        268        122        146  

ESN and other

     1,516                                           1,439                             

Total Wholesale

     8,217        287        230        57                8,261        294        227        67  
                                                                                 

Wholesale share of joint ventures

                         

Nitrogen

     713        303        234        69                669        293        245        48  

Total Wholesale including proportionate share in joint ventures

     8,930        288        230        58                8,930        294        228        66  
                                                                                 

 

15


AGRIUM INC. SELECTED NON-IFRS FINANCIAL MEASURES AND RECONCILIATIONS

Certain financial measures in our Press Release are not prescribed by IFRS. We consider these financial measures discussed herein to provide useful information to both management and investors in measuring our financial performance and financial condition.

IFRS requires that we provide and include subtotals and other financial measures in our Consolidated Financial Statements. Such measures become IFRS measures by virtue of being included in the Consolidated Financial Statements. Other measures that are not specifically defined under IFRS and may not be comparable to similar measures used by other issuers are non-IFRS measures. These non-IFRS measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.

The following table outlines our non-IFRS financial measures, their definitions and why management uses each measure.

 

  Non-IFRS financial measure

 

 

Definition

 

 

Why we use the measure and why it is
useful to investors

 

EBITDA   Net earnings (loss) before finance costs, income taxes, depreciation and amortization, and net earnings (loss) from discontinued operations  

EBITDA is frequently used by investors and analysts for valuation purposes when multiplied by a factor to estimate the enterprise value of a company. EBITDA is also used in determining annual incentive compensation for certain management employees and in calculating certain of our debt covenants.

 

Adjusted and guidance EPS   Net earnings (loss) adjusted for certain income (expenses) that are considered to be non-operational in nature.  

These measures provide meaningful comparison to our guidance by eliminating share-based payments expense (recovery), gains (losses) on foreign exchange and related gains (losses) on non-qualifying derivative hedges and significant non-operating, non-recurring items. Our guidance is forward-looking information. We present guidance relevant earnings (loss) per share to provide an update to this previously disclosed forward-looking information.

 

Cash cost of production manufactured (COPM)  

All fixed and variable costs are accumulated in cash COPM excluding depreciation and amortization expense and direct freight.

 

  Enables investors to better understand the performance of our manufactured operations compared to other crop nutrient producers.
   

When cash COPM costs are divided by the production tonnes for the period, the result is actual cash COPM per tonne, which is compared to the standard cash COPM per tonne – a calculation of fixed and variable costs for a standard or typical period of production. The standard cash COPM per tonne is multiplied by the production tonnes for the period, and the resulting dollar amount is transferred to inventory. Any remaining costs are recorded directly to cost of product sold as production volume or cost efficiency variances.

 

Direct freight is a transportation cost to move the product from an Agrium location to the point of sale.

 

There is no directly comparable IFRS measure for cash COPM.

 

 

16


Consolidated and business unit EBITDA    Three months ended December 31,  
(millions of U.S. dollars)    Retail      Wholesale      Other     Consolidated  

2017

          

Net earnings

             18  

Finance costs related to long-term debt

             55  

Other finance costs

             30  

Income taxes

             10  

Net loss from discontinued operations

                               9  

EBIT

     174        76        (128     122  

Depreciation and amortization

     74        58        6       138  

EBITDA

     248        134        (122     260  
                                    

2016

          

Net earnings

             67  

Finance costs related to long-term debt

             51  

Other finance costs

             21  

Income taxes

             23  

Net loss from discontinued operations

                               2  

EBIT

     134        151        (121     164  

Depreciation and amortization

     68        57        6       131  

EBITDA

     202        208        (115     295  
                                    

 

17


Potash Corporation of Saskatchewan Inc.

Condensed Consolidated Statements of (Loss) Income

(in millions of US dollars except as otherwise noted)

(unaudited)

 

                     Three Months Ended                     Twelve Months Ended  
                     December 31                     December 31  
              2017             2016 (1)             2017             2016 (1)  

Sales (Note 2)

     $           1,081       $           1,058       $           4,547       $           4,456  

Freight, transportation and distribution

     (116     (130     (537     (535

Cost of goods sold (Note 2)

     (1,043     (765     (3,335     (3,091

Gross Margin

     (78     163       675       830  

Selling and administrative expenses

     (60     (45     (214     (212

Provincial mining and other taxes

     (26     (36     (151     (124

Transaction costs (Note 3)

     (51     (10     (84     (18

Other expenses (Note 4)

           (14     (17     (17

Operating (Loss) Income

     (215     58       209       459  

Finance costs

     (58     (55     (238     (216

(Loss) Income Before Income Taxes

     (273     3       (29     243  

Income tax recovery (expense) (Note 5)

     153       10       183       (44

Net (Loss) Income from Continuing Operations

     (120     13       154       199  

Net Income from Discontinued Operations (Note 6)

     44       33       173       124  

Net (Loss) Income

     $               (76     $                46       $              327       $              323  
                                  

Net (Loss) Income per Share from Continuing Operations

        

Basic

     $            (0.14     $             0.02       $             0.18       $             0.24  

Diluted

     $            (0.14     $             0.02       $             0.18       $             0.24  
                                  

Net (Loss) Income per Share from Continuing and Discontinued Operations

        

Basic

     $            (0.09     $             0.05       $             0.39       $             0.39  

Diluted

     $            (0.09     $             0.05       $             0.39       $             0.38  
                                  

Dividends Declared per Share

     $             0.10       $             0.10       $             0.40       $             0.70  
                                  

Weighted Average Shares Outstanding

        

Basic

     840,203,000       839,721,000       840,079,000       838,928,000  

Diluted

     840,606,000       840,142,000       840,316,000       839,459,000  
                                  

 

(1)  Certain amounts have been reclassified as a result of discontinued operations described in Note 6.

(See Notes to the Condensed Consolidated Financial Statements)


Potash Corporation of Saskatchewan Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(in millions of US dollars)

(unaudited)

 

                     Three Months Ended                      Twelve Months Ended  
                     December 31                      December 31  
(Net of related income taxes)    2017     2016      2017     2016  

Net (Loss) Income

   $ (76   $              46      $            327     $            323  

Other comprehensive (loss) income

         

Items that will not be reclassified to net income:

         

Net actuarial gain on defined benefit plans (1)

                  46       119        46       16  

Items that have been or may be subsequently reclassified to  net income:

         

Available-for-sale investments (2)

         

Net fair value (loss) gain during the period

     (98     54        30       (34

Cash flow hedges

         

Net fair value (loss) gain during the period (3)

     (9     9        (17     7  

Reclassification to income of net loss (4)

     6       11        34       50  

Other

     1              3       2  

Other Comprehensive (Loss) Income

     (54     193        96       41  

Comprehensive (Loss) Income

   $ (130   $ 239      $ 423     $ 364  
                                   

 

(1)  Net of income taxes of $(20) (2016 - $(76)) for the three months ended December 31, 2017, and $(20) (2016 – $(16)) for the twelve months ended December 31, 2017.
(2)  Available-for-sale investments are comprised of shares in Israel Chemicals Ltd. ("ICL"), Sinofert Holdings Limited ("Sinofert") and other. The company’s investment in ICL was classified as held for sale at December 31, 2017 and the divestiture of all equity interests in ICL was completed on January 24, 2018.
(3)  Cash flow hedges are comprised of natural gas derivative instruments and were net of income taxes of $(7) (2016 - $(4)) for the three months ended December 31, 2017 and $(3) (2016 - $(4)) for the twelve months ended December, 31 2017. In the fourth quarter of 2017, related deferred income tax assets were reduced by $8 due to a US federal income tax rate decrease.
(4)  Net of income taxes of $(5) (2016 - $(6)) for the three months ended December 31, 2017, and $(20) (2016 - $(28)) for the twelve months ended December 31, 2017.

(See Notes to the Condensed Consolidated Financial Statements)


Potash Corporation of Saskatchewan Inc.

Condensed Consolidated Statements of Cash Flow

(in millions of US dollars)

(unaudited)

 

                     Three Months Ended                     Twelve Months Ended  
                     December 31                     December 31  
      2017     2016     2017     2016  

Operating Activities

        

Net (loss) income

   $ (76   $ 46     $ 327     $ 323  

Adjustments to reconcile net income to cash provided by operating activities (Note 7)

     294       246       826       877  

Changes in non-cash operating working capital (Note 7)

     163       61       72       60  

Cash provided by operating activities

            381              353       1,225       1,260  

Investing Activities

        

Additions to property, plant and equipment

     (220     (245     (651     (893

Other assets and intangible assets

           8       (1     (2

Cash used in investing activities

     (220     (237     (652     (895

Financing Activities

        

Proceeds from long-term debt obligations

           496                    496  

Repayment of, and finance costs on, long-term debt obligations

     (500     (4     (501     (8

Proceeds from (repayment of) short-term debt obligations

     440       (647            341       (128

Dividends

     (82     (82     (330     (809

Issuance of common shares

                 1       25  

Cash used in financing activities

     (142     (237     (489     (424

Increase (Decrease) in Cash and Cash Equivalents

     19       (121     84       (59

Cash and Cash Equivalents, Beginning of Period

     97       153       32       91  

Cash and Cash Equivalents, End of Period

   $ 116     $ 32     $ 116     $ 32