May 2, 2008 / 11:48 AM / in 10 years

Agrium rebounds to profit, sees more to come

WINNIPEG, Manitoba (Reuters) - Fertilizer producer and retailer Agrium Inc AGU.TO returned to profit in the first quarter, the company said on Friday, as record world grain prices spurred demand for crop nutrients, seed and chemicals.

Agrium, the world’s third-largest nitrogen producer, reported a profit of $195 million, or $1.23 a share, compared with a loss of $11 million, or 8 cents a share, a year earlier.

“We believe the best is yet to come as we look to the second half of 2008 and into 2009,” Chief Executive Mike Wilson told analysts on a conference call.

Wilson said Agrium expects record earnings of $3.15 to $3.45 per diluted share in the first half of 2008, or $1.92 to $2.22 diluted earnings per share in the second quarter.

He said the company would benefit in its second half from recent fertilizer price hikes caused by tight world supplies and soaring demand from farmers trying to boost yields.

“We expect it will take years before we observe global grain inventories recovering to more historic levels,” Wilson said.

Agrium’s profit beat analysts’ average expectations of 49 cents per share, according to Reuters Estimates.

“We’re obviously in an extremely heady period for fertilizer here,” said Michael Sprung, president at Sprung & Co Investment Counsel.

Agrium shares were up C$3.55, or 4.5 percent, at C$83.15 on the Toronto Stock Exchange on Friday.

Agrium said sales in its normally quiet first quarter were $1.16 billion, up 35 percent from a year earlier.

Calgary, Alberta-based Agrium has become the largest U.S. retailer of fertilizer, seed and chemicals after several acquisitions, including a friendly deal for UAP Holding Co UAPH.O worth a total of $2.65 billion.

Agrium said it obtained regulatory clearance for the deal on Thursday.

The company said its second-quarter outlook excluded contributions from the UAP acquisition.

Sales volumes were lower in its first quarter as wet weather delayed corn planting in the key U.S. Midwest region, where Agrium is eyeing how much of the fertilizer-intensive crop will get planted.

The U.S. Agriculture Department has forecast plantings of 86 million acres, but record prices will probably attract more farmers, despite the planting delays, said Tom Warner, a retail vice-president.

Some farmers could shy away from applying potash and phosphate this fall because of the record prices, said Richard Gearheard, Agrium’s senior vice-president for retail, but he said he did not expect a major decline in volumes.

Agrium is building a $1.2 billion nitrogen plant in Egypt that will boost its capacity by 20 percent starting in 2010, but it said it has had to temporarily suspend construction to address environmental concerns from local residents.

“We think the resumption is more in weeks than in months,” Wilson said.

($1=$1.02 Canadian)

Reporting by Roberta Rampton, Jonathan Spicer, John McCrank; editing by Peter Galloway

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