Agrium warns of lower potash volumes but hikes payout

Mon Sep 23, 2013 11:03am EDT
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By Rod Nickel and Bhaswati Mukhopadhyay

(Reuters) - Canadian fertilizer company Agrium Inc (AGU.TO: Quote) warned that its potash volumes are expected to be about 30 percent lower than normal in the current quarter, but raised its dividend 50 percent, saying that agriculture's longer-term fundamentals are strong.

Potash prices have slipped since mid-summer, when the biggest global producer Uralkali OAO (URKA.MM: Quote) quit its export partnership with Belaruskali and said it would seek to maximize sales volumes.

Shares of potash producers have slid sharply since then, although Agrium has lost only 4 percent, since it is more dependent on nitrogen production. Agrium stock fell 2.3 percent to $87.89 on the New York Stock Exchange in early trading Monday.

The company said wholesale nitrogen and phosphate sales volumes are expected to be down 20 and 30 percent, respectively, and customer demand has been delayed across all three nutrients for the quarter ending in September.

Soft prices, combined with lower sales volumes, are expected to hurt third-quarter wholesale results across all the three nutrients, the company said.

Agrium said outages at its nitrogen plants reduced volumes by about 100,000 tonnes in the quarter, impacting costs.

A further challenge for near-term sales is that a delayed harvest may not leave farmers in the U.S. Midwest time before winter to apply much fertilizer to fields, and may opt instead to apply it in spring.

Agrium said on Monday wholesale earnings before interest and taxes (EBIT) is expected to be about $200 million lower in the third quarter than a year earlier.   Continued...