Agrium profit dives, outlook weaker; shares drop 10 percent

Wed Nov 7, 2012 2:45pm EST
 

By Rod Nickel

(Reuters) - Canadian fertilizer producer and farm-products retailer Agrium Inc (AGU.TO: Quote) AGU.N reported a 56 percent drop in quarterly profit on Wednesday and offered a weaker-than-expected fourth-quarter outlook as key markets China and India balked at signing new contracts to buy the crop nutrient potash.

The company's performance in the third quarter was also hurt by downtime at Agrium's Saskatchewan potash mine and reduced sales of farm products due to the severe U.S. drought. Its shares dropped nearly 10 percent.

New contracts with India and China, the world's top two potash consumers, had been anticipated by late summer, but Agrium CEO Mike Wilson said a deal with China will now come by the first quarter of 2013, and one with India by the second quarter.

"If you look at the robust ag sector and what we have coming at us it doesn't warrant the (price) decreases that they're demanding," Wilson said in an interview with Reuters. "And given our cost to capital and costs of production, we need to resist these significant price decreases they're asking for."

Agrium's New York-listed shares were down 9.7 percent at around $96.75 on Wednesday afternoon, touching a three-month low. The stock was up 55 percent this year through Tuesday, helped by spiking grain prices resulting from the U.S. drought.

Competitor 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.

China is seen as amply supplied with potash, while the nutrient is too expensive for some Indian farmers after a cut in government subsidies.

Agrium sells nearly half its potash in North America.   Continued...