Agrium profit, outlook slump, sending shares down 7 percent

Wed Nov 7, 2012 10:40am EST
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By Rod Nickel

(Reuters) - Canadian fertilizer company Agrium Inc (AGU.TO: Quote) (AGU.N: Quote)'s shares slumped 7 percent after it reported a 56 percent drop in third-quarter profit Wednesday on lower potash sales and offered a weaker-than-expected outlook for the fourth quarter.

Downtime at Agrium's Saskatchewan potash mine and drawn-out contract talks with China and India hurt third-quarter performance, CEO Mike Wilson said.

Agrium's Toronto-listed shares dropped 7.2 percent to around $98.78 in early trading. The stock was up 55 percent this year through Tuesday, helped by spiking grain prices due to the U.S. drought.

"We believe negative initial market reaction could prove pessimistic," said analyst Edlain Rodriguez of Lazard Capital Markets, in a note to clients.

Fertilizer fundamentals remain strong, especially with U.S. farmers likely to plant a near-record-large acreage of corn, a heavy user of crop nutrients, in the spring, he said.

Rival Potash Corp of Saskatchewan (POT.TO: Quote) (POT.N: Quote) last month reported third-quarter earnings down 22 percent due to a standoff on new contracts with China and India. Agrium, Potash and Mosaic Co (MOS.N: Quote) sell potash from Western Canada to offshore markets through marketing agency Canpotex.

New contracts with China and India, the world's top two potash consumers, were anticipated by late summer but are now expected by late this year for China and possibly early 2013 for India.

Both are believed to be seeking discounts from Canpotex, with China currently amply supplied and potash too expensive for some Indian farmers after a cut in government subsidies.   Continued...