Agrium plunges 6 pct, fertilizer rivals also lower

Fri Feb 22, 2013 10:51am EST
 
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* Fertilizer names downgraded despite strong H1 view
    * Agrium Q4 EPS beat, but was lower on adjusted basis
    * Potash Corp, Mosaic, CF shares also weaker

    By Rod Nickel
    Feb 22 (Reuters) - North American fertilizer stocks fell in
early trading on Friday, led by Agrium Inc ,
after a Dahlman Rose analyst downgraded the leading names.
    Analyst Charles Neivert cut ratings for Potash Corp of
Saskatchewan, the world's biggest fertilizer producer,
to "sell" from "hold," and dropped Mosaic Co to "hold"
from "buy." Neivert cut Agrium, CF Industries Holdings Inc
 and Rentech Nitrogen Partners LP to "sell" from
"buy."
    Neivert said the most favorable market conditions for
nitrogen, phosphate and potash fertilizers have passed now that
producers are moving ahead with expanding capacity.
    "Although (the first half) looks good, the industry may be
just one crop away from a significant earnings downdraft driven
by crop and capacity issues," he wrote in a note to clients. 
    From 2012 through 2016, capacity is set to grow 18 percent
for urea, a key nitrogen-based fertilizer, 12 percent for
phosphate and 31 percent for potash, Neivert wrote.
    Potash Corp is focused on its namesake nutrient, while
Agrium and CF mainly produce nitrogen. Mosaic is a leading
producer of phosphate.
    Shares of Potash Corp slipped 1.3 percent and 0.7 percent in
New York and Toronto, respectively, while Mosaic fell 1.9
percent and Rentech lost 4.1 percent in New York.
    Agrium fell the most, by 6.1 percent and 5.4 percent in New
York and Toronto, even though it reported record-high
fourth-quarter profit after normal trading hours on Thursday and
beat analyst expectations for earnings per share. Analyst Robert
Winslow of National Bank Financial noted that on an adjusted
basis, however, Agrium's quarterly profit declined to $2.16 per
share in 2012 from $2.34 a year earlier.
    Agrium is facing a proxy battle with its largest
shareholder, Jana Partners, which wants Agrium to split its
retail and wholesale divisions and make other changes to improve
shareholder returns and operations.
    Equity markets were generally higher in early trading. 

 (Reporting by Rod Nickel in Winnipeg, Manitoba; editing by
Sofina Mirza-Reid)