July 18, 2012 / 1:23 PM / 5 years ago

UPDATE 2-Agrium raises profit forecast; shares climb

* Agrium sees Q2 adjusted EPS of $5.40 to $5.50 per share

* Co had previously forecast a range of $4.18 to $4.78 a share

* Agrium, Potash Corp shares close higher on the NYSE

By Euan Rocha

TORONTO, July 18 (Reuters) - Canadian fertilizer maker and farm products retailer Agrium Inc raised its second-quarter earnings forecast on Wednesday, citing excellent results across its entire crop input business.

The revised forecast lifted shares of the Calgary, Alberta-based company and it has many investors eagerly looking forward to quarterly results from Agrium and its larger Canadian rival Potash Corp .

The fertilizer sector has been one of the few bright spots for investors in recent weeks, as drought conditions in many key corn growing areas in the United States have led to a surge in crop prices. Although the drought may dent near-term fertilizer sales, the spike in corn prices bodes well for nutrient demand ahead of next year’s planting season in the United States - the world’s largest corn grower and a huge buyer of fertilizers.

While Canada’s main stock index the S&P/TSX composite index has fallen about 3.1 percent this year, its fertilizer sub-index has risen nearly 16 percent in the same period, as investors anticipate a surge in nutrient demand and prices.

“The stage is set for a solid fall application and a strong spring as distributors and dealers should be incentivized to restock their lean inventories and farmers will look to maximize income,” said Lazard Capital analyst Edlain Rodriguez in a note to clients.

Rodriguez, who has a ‘buy’ rating on Agrium’s stock, raised his price target on its shares to $105 from $94.

NEW FORECAST

Agrium now expects second-quarter earnings of $5.40 to $5.50 per share, up from a previous forecast of $4.18 to $4.78.

The announcement on Wednesday came less than six weeks after the company tipped the market that its second-quarter results would be at the “upper end” of the $4.18 to $4.78 range, which had been provided in early May.

The news also comes just a day after its U.S. rival, Mosaic Co, reported better-than-expected quarterly results. The fertilizer maker expects sales to remain strong despite drought conditions in many parts of the United States.

“The outlook remains very positive, supported by the significant increase in grain and oilseed prices globally,” Agrium Chief Executive Mike Wilson said in a statement.

Agrium, the largest North American farm products retailer, is set to report second-quarter results on August 2. Potash Corp will report its quarterly results on July 26.

Both companies are likely to report big year-over-year gains in quarterly profits. Agrium’s results will likely represent a record second-quarter for the company. And recent industry data that shows a tightening in North American potash inventories is a positive signal for Potash Corp - the world’s largest producer of the potassium-based nutrient.

Agrium’s New York-listed shares closed 3.5 percent higher at $95.77 on Wednesday. Shares in Potash Corp closed up 1.1 percent at $45.84.

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