February 9, 2012

Agrium reports higher profits on strong agricultural demand

Higher crop prices led to stronger pricing and demand for seeds, fertiliser and other agricultural products, which boosted a 43% increase in Agrium Inc's Q4 net profit.

US-listed shares of the fertiliser producer and retailer rose 3.4% to US$84 in trading before the market opened.

Net income increased to US$193 million or US$1.20 a share, from US$135 million, or US$0.86 a share, a year earlier.

Excluding an impairment-related charge and other one-time items, the Calgary-based company said earnings were US$2.34 a share. Analysts on average had forecast US$1.99, according to Thomson Reuters I/B/E/S.

Agrium, a major producer of nitrogen-based fertilisers like ammonia and urea, is also the largest North American retailer of agricultural inputs like seeds, nutrients and crop protection chemicals.

Strong grain prices and increased food demand from emerging economies have boosted demand for crop nutrients in recent years, benefiting Agrium and its peers in the sector. The steady stream of strong results prompted Agrium to quadruple its semi-annual dividend to US$0.225 a share.

"We believe that the underlying fundamentals for the agriculture sector remain strong as crop inventory levels for most crops remain well below normal levels and in some cases are critically low," chief executive Mike Wilson said.

Quarterly sales rose 32% to US$3.18 billion, on the back of higher prices for the company's crop nutrient products and gains in its retail business from the acquisition of the Landmark Australia retail operations.

In its retail segment, Agrium reported increases in sales of fertilisers, seeds, crop protection products and other services, driven by stronger demand across most regions.

Sales from the wholesale fertiliser segment, which produces nitrogen, phosphate and potash-based nutrients, rose 25%, while earnings jumped 64%, on the back of higher realised selling prices and improved margins.