Low natural gas prices boosted profit for fertilizer maker Agrium Inc., despite a drop in sales. Reduced crop prices and the high U.S. dollar contributed to its revenue decline.

AGRIUM INC. (Toronto symbol AGU; www.agrium.com) continues to shift away from making fertilizers to selling them, along with seeds and other products, to farmers. That cuts its exposure to bulk-fertilizer prices.

In 2015, Agrium’s 1,250 retail stores in North America, South America and Australia supplied 82% of its sales, and 70% of its earnings.

The remaining 18% of sales and 30% of earnings came from making nitrogen-based fertilizers from natural gas. Agrium also operates potash and phosphate fertilizer mines.

Agrium’s sales and earnings vary with global crop prices and weather patterns. Its sales rose 7.9%, from $15.5 billion in 2011 to $16.7 billion in 2012 (all amounts except share price and market cap in U.S. dollars). Sales then slipped to $15.7 billion in 2013 before recovering to $16.0 billion in 2014.

In 2015, Agrium’s sales fell 7.8%, to $14.8 billion. That’s mainly because record harvests depressed crop prices, giving farmers less cash to spend on fertilizers. In addition, the high U.S. dollar has increased the cost of its products in foreign markets such as Brazil and India.

Overall earnings fell 0.7%, from $1.50 billion in 2011 to $1.49 billion in 2012. Due to more shares outstanding, however, per-share earnings rose 0.3%, from $9.52 to $9.55. Lower fertilizer prices cut its 2013 earnings to $7.31 a share (or $1.1 billion), and to $5.51 a share (or $792.0 million) in 2014.

Mining Stocks: U.S. dollar hurts international revenue

However, Agrium’s earnings rebounded to $7.25 a share (or $1.1 billion) in 2015. That’s partly because low natural gas prices have boosted the profitability of its nitrogen fertilizer operations. A major expansion of its Vanscoy potash mine in Saskatchewan also added to its earnings.

Agrium will soon complete an upgrade of its plant in Borger, Texas, which will let it make both dry and liquid fertilizers.

As this project winds down, Agrium’s capital spending will likely fall to between $800 million and $900 million in 2016, from $1.2 billion in 2015.

These savings should give Agrium more room for share buybacks and dividends. In 2015, it repurchased $559 million worth of its shares. The $3.50-a-share dividend yields 4.3%. In 2015, Agrium paid out 45.7% of its earnings as dividends, which is within its 40% to 50% target range.

Long-term trends look positive

Agrium’s earnings in 2016 will likely rise to $8.00 a share, and the stock trades at just 10.2 times that forecast. That’s a low p/e, particularly as the company stands to gain from the long-term need for more food, and the use of crops as renewable fuels.

Recommendation in The Successful Investor.

For a recent report on mining stocks that are also dividend payers—including Agrium—read Mining stocks that pay dividends.

For a recent report on another major Canadian fertilizer producer, read Potash Corp.’s high dividend challenged by low prices.